S&P gives Vietnam 'stable' long-term rating

The ratings agency said that though the stabilisation measures undertaken over the past two years have dampened growth, they have also restored macroeconomic stability, resulting in relatively low and stable inflation, higher confidence in the local currency, and a much improved external liquidity.

Vietnam’s improving external liquidity and moderate foreign debt position supports its credit-worthiness.

The sovereign’s external borrowings remain modest with low-cost debt and long maturity, and S&P projects the gross external debt will drop to about 30 per cent of the GDP in the next three years. It also predicts the gross external financing needs will remain in a comfortable range of between 80 and 90 per cent of the sum of the current account receipts and usable reserves in this period.

“The favourable outlook for Vietnam’s external profile is based on our expectation of little or no commercial external borrowing by the sovereign, along with continuing overall balance-of-payment surpluses, driven by net inflows of foreign direct investments of about 4 per cent of the GDP and a dynamic export sector,” S&P said.

It added that Vietnam’s growth potential is robust, given an export manufacturing sector that is well-diversified and increasingly oriented toward higher value-added goods, a rising share of services and manufacturing in economic output, and the growth of the private sector. Exports are also expected to get a further boost from recent and pending free-trade agreements, the agency said.