Vietnam's credit rating has been improved to BB+ by S&P

DNHN - Vietnam is one of just two nations in Asia-Pacific whose credit rating has been improved by S&P since the beginning of the year, as a result of the country's steady development over the years. Vietnam has a significant edge in attracting international investment flows.

The credit rating agency S&P Global Ratings formally raised Vietnam's long-term national credit rating to BB+ on May 26, with a "Stable" outlook in light of the essentially limited epidemic. With a high vaccination rate, the economy is recovering quickly, and the government has enacted timely and effective policies to help the economy, as well as to open up and welcome the return of visitors to Vietnam.

In addition to the economic outlook, a strong foreign position and the attractiveness of FDI inflows despite the disruption created by the pandemic were crucial reasons for S&P's decision to increase Vietnam's credit rating.

Previously, Deputy Prime Minister Le Minh Khai approved the "Project to Improve the National Credit Rating to 2030" by signing Decision No. 412/QD-TTg dated March 31, 2022. (Project). The particular target of the Project is to obtain a Baa3 (for Moody's) or BBB- (for S&P and Fitch) or better credit rating by 2030. 

In addition, the average annual growth rate of gross domestic product (GDP) over the whole time is around 7 per cent; GDP per capita at current prices will reach approximately 7,500 USD by 2030, and total social investment averaged 33-35 per cent of GDP.

The scheme also aims to control the state budget deficit approved by the National Assembly in the annual state budget estimate and the 5-year national financial plan, aiming to overspend the state budget by about 3% of GDP by 2030; public debt does not exceed 60% of GDP, and government debt does not exceed 50% of GDP. 

S&P greatly values the timely effect of the government when it has implemented administrative processes to assure timely payment of guaranteed obligations, as well as timely economic stimulus programs to assist the economy.

Ensure the projected GDP plan and preserve fiscal stability despite the pandemic's impact on the budget. S&P projects that Vietnam's GDP will increase by around 6.9 per cent in 2022, with a long-term trend of 6.5-7 per cent beginning in 2023.

This credit rating agency also estimates that Vietnam's GDP has expanded significantly in recent years, with a 10-year real growth rate of 4.8%, which is above the norm for low-income nations. comparable input.

With a "Stable" credit outlook, S&P projects that Vietnam's economy will continue to develop over the next 12 to 24 months, overcome obstacles in the period 2020 to 2022, contribute to strengthening its foreign position, and maintain fiscal discipline.

Vietnam is one of just two nations in the Asia-Pacific area that have been upgraded since the beginning of the year because the international situation remains precarious and has resulted in 30 credit downgrades worldwide.

Nonetheless, a rating agency might still downgrade Vietnam if economic circumstances deteriorate fast or if there are major stresses in the banking sector that significantly impair the government's budgetary position. interest payments will surpass 10% of overall government revenue.

Due to its export prowess, Vietnam is extremely reliant on demand from global markets, and China's pandemic-related lockdown, if protracted, will harm economic growth. The combination of rising prices and geopolitical issues such as the Russia-Ukraine conflict might limit the global economy, consequently lowering demand for Vietnamese goods.

Furthermore, S&P identified certain persisting deficiencies in the banking and financial sectors, as well as inflexible laws regarding the distribution of public investment; for Vietnam's economy to expand further, this issue must be resolved. 

Nguyen Dung