Moody's gives Vietnam Ba3 rating, changes outlook to negative

Moody's expects that the government's direct debt burden will decline gradually to around 48% of GDP by 2020, from nearly 53% in 2016.

However, it assesses the country's institutions and governance to be relatively weak, including administrative deficiencies revealed in the delayed debt payments.

Though the financial health of Vietnamese banks has improved over recent years, the banking system remains the chief driver of overall event risks for the sovereign, it said in statement.

Moody’s gave Vietnam negative outlook for some ongoing risk of payment delays on some of the government's indirect debt obligations in the absence of more tangible and significant measures to improve the coordination and transparency around debt management within the administration.

Stable current account surplus and strong foreign direct investment inflows have fortified Vietnam's foreign exchange reserves and contributed to the trend decline in external vulnerability risk since the beginning of the decade.

The Ministry of Finance said the Moody's decision was based on a single incident, without taking into account the Vietnamese Government’s efforts to ensure macroeconomic stability.

The Vietnamese Government has fulfilled the responsibility of the guarantor in the payment obligation, even when it has yet received formal requests from creditors. The Government has never delayed in meeting its payment obligations, ministry said by statement.

During the coming period, the government will pursue the goal of solidifying the macro-economic foundation, enhancing the internal capacity of the economy, promoting institutional reform and opening up resources to maintain national financial security for economic development.