Fitch Ratings expects Vietnam’s economic growth roughly at 6.7% in 2016. (Photo: Internet)
Vietnam’s real gross domestic product (GDP
) growth accelerated to 6.7% in 2015, which Fitch
forecasts as remaining roughly the same in 2016, the U.S. rating agency said in a press release.
“The conclusion of negotiations for a free trade agreement with the European Union in December 2015, and Vietnam’s inclusion in the TPP
[Trans-Pacific Partnership], point to lowering trade barriers and enhanced access to key export markets in future,” the U.S. rating agency added.
Vietnam’s credit rating has benefited from its recent macroeconomic stabilization and a strong macroeconomic outlook, said Andrew Fennell, associate director of Fitch (Hong Kong).
A structural reform-oriented policy trajectory including a focus on macro stability and market liberalization was a key factor supporting Vietnam’s upgrade to ‘BB-/Stable’ in late 2014.
The agency noted that key constraints to further ratings upgrades depended on Vietnamese authorities’ ability to reduce fiscal deficits and improve the outlook for the general government debt ratio, despite the strong macro outlook.
Fitch estimates gross general government debt to have reached 49.3% of GDP in 2015, moderately higher than the ‘BB’ median of 42.8%.
Other weaknesses to the country’s rating profile stem from a relatively weak foreign-reserve base. The foreign-reserve coverage ratio is estimated to have fallen to under 2.1x current account payments at end-2015 - well below the ‘BB’ median peer of 4.2x, according to Fitch.