HANOI, May 10 (Xinhua) -- Fitch Ratings has revised Vietnam's credit outlook to "positive" from "stable" while affirming the country's sovereign credit rating at "BB".
The revision of Vietnam's outlook reflected an improving track record of economic management, strengthening external buffers from persistent current account surpluses, falling government debt levels, high economic growth rates and stable inflation, the Vietnamese Ministry of Finance cited Fitch's report as saying on Friday.
Vietnam's continued commitment to containing debt levels led to a decline in general government debt to 50.5 percent of gross domestic product (GDP) in 2018 from a peak of 53 percent in 2016, Fitch said, expecting this ratio to decline further to around 46 percent by 2020.
The agency also estimated that Vietnam's budget deficit will stand at 3.6 percent of GDP in 2020, compared with the target of 3.5 percent of GDP by 2020 under its 2016-2020 medium-term budget plan.
According to Fitch, the Vietnamese authorities are maintaining their policy focus on macroeconomic stability. GDP growth improved to 7.1 percent in 2018 from 6.8 percent in 2017 while inflation remained stable at 3.5 percent, within the target of below 4 percent.
Growth remained supported by strong foreign direct investment into the manufacturing sector as well as expansion in the services and agriculture sectors. The agency expected Vietnam to remain an attractive destination for foreign investors given its low cost advantage.
Meanwhile, structural weaknesses in the banking sector continued to weigh on the sovereign rating. The banking system's non-performing loans remain under-reported and true asset quality is likely to be weaker. Recapitalization needs of the banking sector remain a risk for the sovereign and sustained rapid credit growth poses a risk to financial stability, Fitch said.
In early April, S&P Global Ratings also upgraded Vietnam's long-term sovereign credit rating to "BB" from "BB-", the first time since 2010, and maintained its outlook at "stable". In August 2018, Moody's lifted the country's rating from "B1" to "Ba3" and upgraded its outlook from "positive" to "stable".
