Moody's raises Vietnam

Moody's Investors Service said it upgraded Vietnam's long-term issuer and senior unsecured ratings to Ba2 from Ba3 and changed the outlook to stable from positive.

“The upgrade to Ba2 reflects Vietnam's growing economic strengths relative to peers and greater resilience to external macroeconomic shocks that are indicative of improved policy effectiveness, and which Moody's expects to continue as the economy benefits from supply chain reconfiguration, export diversification and continued inbound investment in manufacturing.

“The rating also reflects a sounder fiscal footing backed by contained borrowing costs, a conservative approach to fiscal policy and improved government liquidity, driven by the ongoing transition from external concessional borrowing toward longer-dated, low-cost domestic market financing,” the agency said in a press release.

“The stable outlook reflects a balance of risks to the rating. On the positive front, Moody's expects continued improvements in economic competitiveness to support rising incomes and advancements in fiscal prudence demonstrated through the execution of a more systematic, long-term debt management strategy and an increasing emphasis in fiscal policy on long-term challenges, including improving worker productivity and mitigating against physical climate risks,” the agency said.

However, the low capitalization levels of state-owned banks, high domestic credit growth and risks from the real estate sector could hurt the economy if a shock presents itself, Moody’s warned.

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