(Bloomberg) -- Vietnam earned a sovereign credit rating upgrade from Fitch Ratings on favorable medium-term growth outlook, putting the nation closer to investment grade.

The rating on the country’s long-term, foreign currency-denominated debt was raised to BB+ from BB, with a stable outlook, according to a statement from Fitch on Friday.

“The upgrade reflects Vietnam’s favorable medium-term growth outlook, underpinned by robust foreign direct investment inflows,” Fitch said in the statement.

Vietnam’s government has ramped up its push to bolster the economy, with Prime Minister Pham Minh Chinh seeking to return gross domestic product growth to 6% to 6.5% in 2024 from an estimated 5% this year.

Fitch forecasts medium-term growth of about 7% with the country’s cost competitiveness, educated workforce and entry into regional and global free-trade agreements spurring continued strong foreign investment amid global supply chain diversification.

Foreign-exchange reserves improved modestly to $89 billion as of the end of September after a sharp drop in 2022, Fitch said. Reserves are expected to improve in 2024-2025, it said.

Weakness in the property sector and slower economic growth have dampened loan demand, Fitch said. Some highly leveraged firms face possible refinancing risks as maturities come due. “Many banks have not reduced real-estate lending or bond holdings significantly, suggesting that they will refinance qualified borrowers to avoid crystallizing wider defaults and losses,” it said.


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