Credit rating agency Fitch Ratings has upgraded Vietnam's long-term issuer default ratings (IDRs) to ‘BB+,' reflecting a favorable medium-term growth outlook in the Southeast Asian nation.

The outlook is underpinned by robust foreign direct investment (FDI) inflows, according to its recent report.

The agency forecasts Vietnam’s growth in the medium term at around seven percent.

Vietnam’s cost competitiveness, educated workforce compared with peers, and entry into numerous regional and global free trade agreements should bode well for continued strong FDI inflows, particularly in the context of ongoing global supply chain diversification. 

Vietnam had attracted over US$36.6 billion in foreign investment as of December 20, a rise of 32.1 percent year on year, according to the Foreign Investment Agency under the Ministry of Planning and Investment.

Of the total foreign investment commitments from early this year to December 20, $20.18 billion was channeled into nearly 3,200 new projects, $7.88 billion into some 1,300 underway projects, and $8.54 billion through capital contribution and share purchase transactions.

The elevation of Vietnam-U.S. bilateral ties to a comprehensive strategic partnership in September is anticipated to pave the way for increased FDI from the U.S. into Vietnam and foster greater trade between the two nations, as suggested by the report.

The agency also noted that Vietnam’s foreign exchange reserves had reached $89 billion as of end-September 2023, after a sharp decline in 2022.

“We have increasing confidence that near-term economic headwinds from property-sector stresses, weak external demand, and delays in policy implementation owing to a corruption crackdown are unlikely to affect medium-term macroeconomic prospects and that policy buffers are sufficient to manage near-term risks,” said Fitch Ratings.

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