VCN – Moody’s Investors Service upgraded the Government of Vietnam’s long-term issuer and senior unsecured rating from Ba3 to Ba2 and changed the outlook from stable to positive.
|Moody’s upgrades Vietnam’s rating to Ba2|
The Ministry of Finance said that the upgrade to Ba2 reflected the assessment by Moody’s that Vietnam’s economy has growing strengths and greater resilience to external macroeconomic shocks that are indicative of improved policy effectiveness.
Moody’s expected the situation would continue as the economy benefited from supply chain reconfiguration, export diversification and continued inbound investment in manufacturing.
The rating also reflected a sounder fiscal footing backed by container 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.
According to Moody’s assessment, Vietnam’s economic strength is consolidated by increasing competitiveness and integration with global value chain support. The growing competitiveness of Vietnam’s manufacturing sector has outperformed regional peers and has driven a rapid rise in per capita income.
Moody’s expected Vietnam’s centrality to multiple regional and bilateral agreements to affirm its entrenched position in global value chains. Moreover, these trade agreements will strengthen Vietnam’s competitiveness in lower-value products while firmly placing it in higher value-added regional tech supply chains.
The effectiveness of fiscal policy is also one of the main factors contributing to the rating upgrade. The government has implemented medium-term budget planning and deepening domestic, low-cost financing sources. The National Assembly has also lowered the statutory public debt ceiling to 60% of GDP from 65% to anchor debt levels better while preserving fiscal flexibility amid the ongoing economic recovery.
In fiscal policymaking, the government also focuses on providing radical solutions towards long-term challenges such as improving resilience to climate change risks, investing in education, etc. and vocational training to improve labor productivity and create jobs in occupations with higher added value. These are factors that are highly rated by Moody’s.
According to the Ministry of Finance, Moody’s raising the national credit rating of Vietnam in the context of global fluctuations and challenges is very positive, showing the international community’s appreciation for its directing and administration of the Party, National Assembly and Government of Vietnam to stabilize and restore the macro-economy, strengthen the socio-political foundation; the efforts of Ministry of Finance and related ministries and sectors in conveying Vietnam’s policies and achievements to credit rating agencies and international organizations.
In the context of the complex international situation, leading to more than 30 credit downgrades in the world in the first eight months of the year, Vietnam is the only country in the Asia-Pacific region. On the other hand, it is one of four countries worldwide upgraded by Moody’s since the beginning of the year.
The Ministry of Finance said they would continue coordinating with Moody’s, credit rating agencies and other international organizations to continue to have a complete and up-to-date assessment of Vietnam’s credit profile.
By Hoài Anh/Thanh Thuy