Vietnam is one of the two countries in the Asia-Pacific region whose credit ratings have been upgraded by S&P Ratings.

S&P Ratings recently upgraded Vietnam’s long-term sovereign credit rating to BB+ with a “Stable” outlook.

The upgrade is based on the recognition that Vietnam’s economy is on a solid recovery in the context of the Government lifting travel restrictions, improved vaccination rates, and flexible moves in Covid-19 control policy.

A marked improvement in administrative processes and procedures, especially those related to the quality of guaranteed debt management, along with a strong economic outlook, a firm position in international market and huge FDI capital flow are important factors that made S&P decide to upgrade Vietnam’s credit rating.

However, this agency also warned that the credit rating could be downgraded if economic conditions deteriorate rapidly, or significant problems in the banking system seriously weaken the fiscal situation.

The “Stable” outlook reflects S&P’s expectation that Vietnam’s economic recovery will continue over the next 12-24 months, despite the challenges posed by the pandemic over the past two years, thereby helping strengthen the country’s position and control budget deficit.

S&P forecasts Vietnam’s GDP growth in 2022 at around 6.9%, with a long-term trend at 6.5-7% from 2023.

According to the rating agency, macroeconomic stability along with competitive advantages in labor, improved education standards and favorable demographics are the key drivers of Vietnam’s attractiveness in the processing and manufacturing sector to global firms, which drives export growth and boosts consumption.

In the fiscal field, S&P assessed that Vietnam’s public finance remains in a stable state, even in the context that the state budget revenue and expenditure are under certain pressure due to the impact of the pandemic.

This organization forecasts that the budget deficit may increase temporarily with the implementation of the Socio-Economic Development and Recovery Program. However, S&P believed that policy room is still abundant in the context of a sharp decrease in public debt. .

The Ministry of Finance of Vietnam said it will continue to coordinate with S&P, other credit rating agencies as well as other international organizations to continue to have a complete and up-to-date assessment of Vietnam’s credit profile.

Henry Tran – VietnamCredit