Want to be in the loop?
subscribe to
our notification
Business News
PROPERTY-RELATED RISKS IN VIETNAM DECREASING
Although the risks associated with Vietnam's struggling real estate market have diminished, Fitch Ratings has warned that the country could still be vulnerable to external shocks.
In 2022, the Vietnamese government began its policy-driven crackdown on financing practices among developers in the real estate market. Two well-known developers were detained, and bond issuing regulations were tightened.
Fitch Ratings generally views the authorities' commitment to combating the emerging property-financing bubble as a positive factor for financial stability, although a lax regulatory approach is likely to have contributed to the prior rise in non-compliant underwriting practices among some developers' bond issuers over 2018–2021.
The aggressiveness of regulatory moves in 2022 crystallised liquidity and credit risks for the property and banking sectors. However, Fitch Ratings believes that, with interest rates having fallen back, the associated stress has peaked and worst-case scenarios that might have seen contingent liabilities migrate to the sovereign balance sheet appear much less likely.
In addition, Vietnam also ran down its official foreign-exchange reserves through 2022, which was largely to alleviate downward pressure on the VND. Reserves dropped from a peak of $112.2 billion in January 2022 to $85.9 billion in November 2022, before recovering slightly into 2023.
The deployment of reserves to smooth market volatility is not problematic in itself. However, Fitch Ratings views reserves as an important protection against the risks posed by external shocks in fast-growing export-oriented economies like Vietnam.
The move has eroded Vietnam’s reserve buffer, which was already small – reserves averaged 3.2 months of current account outgoings over 2018-2022, against the ‘BB’ sovereign median of 5.2 months.
Source: VIR
Related News
VIETNAM INTENSIFIES E-COMMERCE TAX SCRUTINY
The department plans to offer guidance for and hold direct dialogues with e-commerce taxpayers to ensure compliance. Efforts will also include updating the e-commerce database, conducting risk analysis, and leveraging artificial intelligence (AI) to manage data and issue alerts.
FOOTWEAR EXPORTS SEEN REACHING US$27 BILLION THIS YEAR
This optimistic forecast reflects the industry’s efforts to expand and diversify its markets. Lefaso indicated that Vietnam’s footwear sector will concentrate on traditional markets like the U.S. and the European Union, alongside markets with free trade agreements to maximize opportunities.
2025 PIVOTAL FOR STOCK MARKET UPGRADE EFFORT
The Ministry of Finance (MoF) is expected to soon publish the entire content of the draft circular amending and supplementing four circulars on transactions, registration, depository, and clearing, as well as operations of securities companies and information disclosure. This move, along with feedback and explanations, aims to meet the criteria for upgrading Vietnam’s stock market.
CAPITAL FLOWS STRONGLY INTO INDUSTRIAL REAL ESTATE
Industrial real estate has had easier access to bank credit since July, when the State Bank of Vietnam (SBV) reduced the credit risk coefficient for industrial real estate from 200 per cent to 160 per cent, encouraging commercial banks to lend to more projects in the segment.
GDP GROWTH REACHES 6.42 PC IN FIRST HALF
Vietnam's economy grew by 6.42 pc in the first six months of 2024, slightly lower than the figure of 6.58 pc in the same time of 2022 within the 2020-2024 period.
FDI INFLOW INTO VIETNAM REACHES NEARLY 15.2 BILLION USD
Vietnam attracted nearly 15.2 billion USD in foreign direct investment (FDI) in the first six months of this year, a year-on-year increase of 13.1 per cent, according to the General Statistics Office.