Fitch Ratings has forecast Vietnam’s growth in the medium term at around 7%. (Photo: VNA)

In a report released recently, the agency said Vietnam’s cost competitiveness, educated workforce compared with peers, and entry into numerous regional and global free trade agreements (FTAs) should bode well for continued strong FDI inflows, particularly in the context of ongoing global supply chain diversification.

It cited statistics showing realised FDI in Vietnam last year was 22.4 billion USD (about 6% of GDP), up from 19.7 billion USD in 2021, and realised FDI until November 2023 was 20.2 billion USD.

The upgrade of the Vietnam-US relationship to a comprehensive strategic partnership in September could facilitate greater US FDI flows into and trade with Vietnam, according to the report.

The agency also noted the improvement of external finances, saying Vietnam’s foreign exchange reserves as of end-September 2023 reached 89 billion USD, after a sharp decline in 2022.

It has upgraded Vietnam’s Long-Term Issuer Default Ratings (IDRs) to 'BB ', which it said reflects the country’s favourable medium-term growth outlook.

The outlook is underpinned by robust FDI inflows, that the agency expects will continue to drive sustained improvements in Vietnam’s structural credit metrics.

“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,” Fitch said.