Moody’s raises Vietnam's rating to Ba2, outlook changed to stable

The upgrade to Ba2 reflects Vietnam's growing economic strengths relative to peers and greater resilience to external macroeconomic shocks that are indicative of improved policy effectiveness, it said in a statement.  

Moody's expects Vietnam to continue as the economy benefits from supply chain reconfiguration, export diversification and continued inbound investment in manufacturing. 

Moody's upgrade of Vietnam's national credit rating to Ba2 thanks to the country’s increasingly stronger economy and resilience to external macro shocks, commented Ministry of Finance. 

The upgrade also reflects a sustained fiscal footing backed by reasonably controlled borrowing costs, prudent fiscal policy management, and improved liquidity of the Government debt portfolio. 

This also indicates the Government's tendency to gradually switch from foreign concessional loans to mobilizing loans in the domestic market with low cost and longer terms.

Moody’s attributed Vietnam's economic strength to enhanced competitiveness and deeper participation in global value chains. 

The increased competitiveness in the country’s manufacturing and processing sector demonstrates superior efficiency compared to other countries of the same rank in the region has contributed to the improvement of Vietnamese people’s income. 

In addition, thanks to bilateral and regional trade agreements, Viet Nam has affirmed its expanding position in the global value chain. 

Moody assesses that these free trade agreements will help improve Viet Nam's competitiveness in the commodity portfolio with lower added value, while firmly consolidating Viet Nam's position in the supply chain of technology products with high added value.

Despite below-potential growth in 2021, Vietnam's fiscal performance was stable, recording a 3.4% of GDP deficit with revenue collection exceeding its target by 16.8% - partially due to companies' lower than expected uptake of stimulus support measures such as corporate income tax deferrals. 

Vietnam's government debt burden registered a moderate rise to 39.1% of GDP in 2021, higher than previously forecast but comparable to levels in previous years and below the statutory public debt ceiling.

For 2022, Moody's expects the fiscal deficit to be marginally higher at around 3.8%, in line with the Ba-rated median, as the authorities implement the Socio-Economic Recovery and Development Program, valued at VND350 trillion ($14.9 billion, or 4.1% of 2021 estimated GDP). 

Moody's expects Vietnam's fiscal deficit to consolidate to around 2.7% by 2025, with the government debt burden set to decline to around 37%.