S&P affirms Vietnam ratings at ‘BB-/B’ with outlook stable
HANOI - S&P Global Ratings has affirmed its 'BB-' long-term and 'B' short-term sovereign credit ratings on Vietnam, with the outlook stable. The transfer and convertibility assessment remains unchanged at 'BB-'.
The agency says the stable outlook reflects its expectations that Vietnam's economy will continue to expand rapidly, underpinning gradual improvements in its key fiscal credit measures over the next one to two years.
“We may raise our ratings if the economy's continued outperformance significantly improves fiscal outturns, and systemic banking system risks
recede appreciably,” S&P says.
“We may lower the ratings if:
•Rapid credit growth materially weakens Vietnamese banks' credit metrics;
•Government debt or guarantees on debts owed by non-financial public
enterprises rise considerably from current levels; or
•Annual fiscal deficits are higher than we had expected, leading to a
higher annual change in net general government debt relative to GDP.”
S&P says the ratings on Vietnam reflect the country's lower middle-income economy, legacy banking sector weaknesses, and emerging institutional settings, which may hamper policy responsiveness.
These weaknesses are offset by Vietnam's external settings, which feature broadly balanced external accounts, strong foreign direct investment (FDI) inflows, and a manageable external debt burden.
Per capita GDP is forecast at approximately US$2,524 in 2018.
Export-led growth and robust domestic demand are expected to keep the trend growth for real per capita GDP above average for the forecast period.
Strong FDI in manufacturing, combined with competitive unit labour costs relative to Malaysia, Thailand, and Indonesia, and a large, young, and
educated labour force, imply further strength in exports over 2018-2020, S&P says. www.standarfdandpoors.com (ATI).