Fitch revises Vietnam’s outlook to positive, affirms at 'B+'

Fitch Ratings has affirmed Vietnam’s long-term foreign-and local-currency Issuer Default Rating (IDR) at B+ following optimistic economic performance.

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The Outlooks on the Long-Term IDRs are revised to Positive from Stable. The Country Ceiling is affirmed at “B+” and the Short-Term Foreign Currency IDR at ''B''.

According to Fitch Ratings, thanks to improvement in macroeconomic stability, the economy has begun to recover following a difficult period after austerity measures were implemented in early 2011 under Resolution 11 to cool an overheated economy.

Real GDP grew 5.4% in 2013 (5.2% in 2012) as both domestic and external demand picked up.

Fitch forecasts real GDP to grow 5.7% and 5.9% in 2014 and 2015 respectively. Inflation has moderated, coming in at 6.6% in 2013 compared with 9.1% in 2012 and 18.7% in 2011.

Fitch estimates that Vietnam recorded another large current account surplus of 5% of GDP in 2013 (5.8% in 2012).

Strong foreign direct investment (FDI) inflows, at 6.8% of GDP in 2013, continue to underpin the expansion in the manufacturing/export sector.

According to the global rating agency, the banking sector remains a source of weakness for Vietnam’s credit profile due largely to a high but unknown level of non-performing loans (NPLs). The implementation of Circular 2, which will apply stricter rules in classifying and provisioning for NPLs was delayed until June 2014.

However, the authorities have begun to address the issue by creating a national asset management company to help resolve NPLs.