Successful Covid-19 fight boosts Vietnam infrastructure market ranking among Asian peers

Vietnam continues its steady ascend up the Infrastructure Risk/Reward Index (RRI) ranking, as a successful Covid-19 containment strategy has limited impact on its economy, and has enabled it to outperform that of its regional peers, according to Fitch Solutions, a subsidiary of Fitch Group.

Source: Fitch Solutions.

Specifically, Vietnam’s RRI score increased from 63.1 to 64.5, and is above the regional average of 57.0.

Fitch Solutions’ view is mainly informed by the severity of Covid-19 outbreak in each market, as this would have various consequence, such as the need to enforce lockdowns, the extent of disruption to construction activity and supply chains, and the impact on short-term economic growth.

In general, markets that are more successful in containing Covid-19 will have a better growth outlook in the short-term. These include New Zealand, South Korea and Vietnam. In particular, despite being home to a large population of more than 90 million and in close proximity to numerous Covid-19 hotspots, the number of Covid-19 cases in Vietnam remains low relative to its regional peers, making it one of the most attractive infrastructure markets this quarter.

Vietnam’s economy is expected to buck the global trend and expand by 3.0% year-on-year in 2020, being one of the best performing economies in the world in 2020. Likewise, Fitch Solutions also predicted Vietnam’s construction sector to expand by 5.7% year-on-year in 2020, a slowdown as compared to previous years but nonetheless bright outlook given challenging circumstances faced in the short-term.

Source: Fitch Solutions.

Meanwhile, the Asia-Pacific (APAC) region is not spared from Covid-19 devastating impact on global economy, as the outlook of key construction markets such as the Philippines, India, China and Indonesia have all deteriorated due to the pandemic.

Fitch Solutions, as a result, have made downward revisions to its growth forecasts to all construction markets in the APAC region, to reflect the muted short-term outlook.

As governments increasingly face challenges on the fiscal front, the short-term solution is often to divert government spending away from costly infrastructure projects to address immediate and urgent needs.

Despite this, APAC’s overall RRI improved from 56.5 to 57.0 this quarter, mainly due to the region’s strength as compared to other regions such as Latin America, where a relatively severe outbreak is observed. Also, long-term outlook of the APAC region remains robust given the presence of infrastructure development plans which will see a large amount of investments into the sector over the next five to ten years.