Vietnam 'must reform' to sustain growth
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Vietnam's economic and financial reforms still have a long way to go before the country can return to a sustained period of strong economic growth, said Standard & Poor's Ratings Services in a report published on Monday titled "Can Vietnam Sustain Its Eco
“The sophistication and effectiveness of Vietnam’s policy institutions, such as the central bank, are still below the levels of higher-rated sovereigns,” said Standard & Poor’s credit analyst Kim Eng Tan.
“In an economy that is highly leveraged for its stage of development, this weakness increases Vietnam’s vulnerability to adverse economic or financial developments.”
Standard & Poor’s rates Vietnam in the speculative-grade category (BB-/Stable/B; axBB+/axB), suggesting significant risk levels.
Key tasks for the government include tackling inefficiencies in state-owned enterprises and implementing measures to restructure weak banks and deal with their high level of non-performing loans.
“Institutional and structural improvements to ensure smooth economic development are still a work in progress at best,” said Tan. However, the report noted that many positive developments have improved Vietnam’s allure for investors in the past two years. These include growing confidence that strengthening economic fundamentals will support the value of the dong, which has brought funds back to domestic banks. In addition, low-risk international investments are paying practically zero yields, adding to the attraction of Vietnam’s high interest rates.
The economy also outperformed expectations last year, albeit against low expectations.
