Fitch Ratings has downgraded Home Credit Vietnam Finance Company Limited's (HCV) long-term issuer default rating (IDR) to 'B', from 'B+'.

The consumer finance company's outlook is negative.

The downgrade reflects the probable pressure the coronavirus pandemic will place on HCV's credit profile, as well as rising challenges to the finance company's business model and profitability as a result of increased industry competition and new regulations finalised in late 2019.

Viet Nam's open economy is exposed to a global demand slowdown as a result of the coronavirus. GDP growth had already slowed to a seven-year low of 3.8 per cent in the first quarter of this year, from 7 per cent in the last quarter of 2019.

Fitch expects Viet Nam’s GDP growth to remain muted, with the assumption that the economy starts to recover in the latter half of 2020. However, Fitch’s GDP forecasts remain subject to downside risk.

According to Fitch, it viewed Viet Nam's unsecured consumer finance companies as being at risk of asset quality deterioration in the current environment, as they are typically exposed to less affluent borrowers with more limited resilience against financial distress. The slowdown will weigh on consumer spending and consumer loan growth, affecting volume and profitability. — VNS