Tra fish processed for export at Cuu Long An Giang Seafood Import - Export Company in An Giang Province. (Photo: VNA)Hanoi (VNS/VNA) - Standard and Poor’s (S&P)Global Ratings’ recent upgrade of its long-term sovereign credit ratingfor Vietnam, the first time since 2010, was expected to help the countryto attract more foreign investments into the economy and expand exports.
Late last week, S&P raised its long-term sovereigncredit rating for Vietnam to “BB” from “BB-”.
“The stable outlook reflects out expectation that Vietnam’seconomy will continue to expand rapidly, exemplifying gradual improvements inits policy-making setting and underpinning credit metrics,” S&P wrote ina press release.
This was the first upgrade since December 2010. The upgradereflected continued improvements in the Government’s institutional settings,which S&P believed were supporting consistently strong economic growth anddevelopment. Vietnam’s broadly balanced external accounts, strong foreigndirect investment inflow and a manageable external debt burden provided furthersupported to the rating, it said.
S&P said the Vietnamese economy had achieved impressivedevelopment including consistently high GDP growth.
“Importantly, the Vietnamese government has delivered strongdevelopment outcomes since the global financial crisis and its owndomestic banking sector crisis at the beginning of this decade,” thecredit rating agency said.
“We believe the government's accession as a foundingsignatory to the Comprehensive and Progressive Agreement to Trans-PacificPartnership (CPTPP) in late 2018 reflects the government's willingness to adoptand implement necessary reforms, especially in the state sector, over the longterm.”
Although Vietnam had a lower middle-income economy, with GDPper capita projected at approximately 2,695 USD in 2019, the economy wasrelatively diversified.
“Continued improvements in macroeconomic stability havesupported a strong performance in large foreign-owned and export-focusedmanufacturing sectors (electronics, mobile phones, and textiles). The robustFDI-oriented economy is fuelling stronger domestic activity, particularly throughthe private consumption channel.”
Vietnam's per capita income increased to an estimated 2,572 USDin 2018 from approximately 1,754 USD in 2012.
According to S&P, strong FDI in manufacturing continuedin 2018 despite a more challenging external environment, reflecting theresilience of Vietnam's investment environment.
“The country's competitive unit labour costs, improvingeducational standards and constructive demographics implied continuedgrowth in FDI and goods exports,” the rating agency said, adding thatparticipation in free trade agreements, including the recently establishedCPTPP, could provide a further upside to Vietnam's export earnings.
The country still faced a variety of domestic andexternal risks, such as trade disputes, elevated fiscal deficits and publicdebt, and q relatively weak banking sector, S&P pointed out.
Senior economist from the Bank for Investment andDevelopment of Vietnam Can Van Luc said that S&P’s upgrade on Vietnamreflected the country’s stable macroeconomy, improved fiscal policy and betterbusiness climate.
The upgrade would help consolidate confidenceamong investors and attract more foreign investment inflow, Luc said,adding that there was still room for improvement.
Luc said the country needed to speed up its restructuringprocess and increase the economy’s resilience to external shocks by resolvingbad debt, improving fiscal policy and increasing foreign currency reserves.
In August 2018, credit rating agency Moody’s InvestorsService has also upgraded Vietnam’s long-term issuer and senior unsecuredratings to Ba3 from B1 and changed the outlook to stable from positive.
Fitch Rating in May 2018 upgraded Vietnam’s long-termforeign-currency issuer default rating to BB from BB- with a stable outlook.-VNS/VNA
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