Moody’s and SP affirms Việt Nam’s sovereign rating

Moody’s has affirmed Viet Nam’s credit rating with positive outlook. - Photo customsnews.vn

HÀ NỘI – Two major credit rating agencies, Moody’s and Standard Poor’s (S P), on Friday affirmed Việt Nam’s sovereign rating, citing the country’s strong foreign direct investment (FDI) inflows, macroeconomic and external stability and modest external debt burden.

Moody’s affirmed the Government of Việt Nam’s B 一 issuer and senior unsecured debt ratings, while it raised the outlook to positive from stable.

Moody’s B 一 rating, four steps below investment grade, is considered relatively stable, with a moderate chance of default.

The company also raised its assessment of Việt Nam’s local-currency bond to Baa 三 from Ba 一, while the foreign currency bond remained at Ba 二.

The positive outlook for Việt Nam is based on three key drivers, including strong FDI inflows, boosted by ongoing economic reform and liberalisation; macroeconomic and external stability; and the stabilization of prospective debt and an improved funding profile.

Moody’s noted that robust FDI inflows will continue to sustain Việt Nam’s dynamic economic performance relative to similar-rated peers, as it allows Việt Nam to diversify its economy and gain market share in international trade.

Việt Nam has seen significant improvements in the investment climate. Its ranking rose to  六0th out of  一 三 八 countries in the  二0 一 六- 二0 一 七 World Economic Forum Global Competitiveness Index, up from  七0th in  二0 一 三- 一 四, while its showings in the World Bank’s Doing Business Indicators similarly rose to  八 二nd out of  一 九0 countries in  二0 一 七, and from  九 九th in  二0 一 四.

Further, Việt Nam has become a more important node in the regional supply chain for electronics, especially for mobile phones, as foreign investments have helped to diversify the economy towards higher value-added manufacturing. Its market share nearly doubled to  一. 二 per cent of world exports in  二0 一 六, from 0. 七 per cent in  二0 一 三.

Moody’s expected the country’s economic growth to remain robust at around  六. 三 per cent per annum through  二0 一 九.

S P Global Ratings on Friday also affirmed Việt Nam’s long-term ‘BB-’ credit ratings and short-term ‘B’ credit ratings with a stable outlook.

The ratings have reflected the country’s lower middle-income, banking sector weakness, and emerging institutional settings that hamper the responsiveness of policy.

“These weaknesses are offset by Việt Nam’s external settings that feature balanced external accounts, strong foreign direct investment inflows and a modest external debt burden,” S P said in a press release.

The rating company said financial and technical assistance that Việt Nam has received from donors also contributed to the rating.

Its stable outlook reflected the company’s expectation that Việt Nam’s growth prospects will continue to improve, leading to gains in its key economic and fiscal measures, it said.

However, it has cautioned that the large fiscal deficit and rising debt burden, with net general government debt at  四 六. 六 per cent of GDP in  二0 一 六, signal a further delay in fiscal consolidation. S P estimates that the fiscal deficits will average  四. 九 per cent of GDP over  二0 一 七- 二0, down from an average  六. 四 per cent over  二0 一 二- 一 六.– VNS