Moody’s Investors Service (“Moody’s”) has today upgraded the Government of Vietnam’s long-term issuer and senior unsecured ratings to Ba3 from B1 and changed the outlook to stable from positive.
The upgrade to Ba3 is underpinned by strong growth potential, supported by increasingly efficient use of labor and capital in the economy.
A long average maturity of government debt and a diminishing reliance on foreign-currency debt point to a stable and gradually moderating government debt burden, particularly if strong growth is sustained over time. The structure of Vietnam’s government debt also limits susceptibility to financial shocks.
The upgrade also reflects improvements in the health of the banking sector that Moody’s expects to be maintained, albeit from relatively weak levels.
The stable outlook reflects balanced risks at the Ba3 rating level
While downside risks may arise from persisting weaknesses in the banking system or if the ongoing trade dispute between the US and China resulted in a sharp slowdown in global trade, there are upside risks from further improvements in debt affordability and better trade performance than we currently project.
Moody’s has also raised Vietnam’s long-term foreign currency (FC) bond ceiling to Ba1 from Ba2 and its long-term FC deposit ceiling to B1 from B2. The short-term FC bond and deposit ceilings remain unchanged at Not Prime. Vietnam’s local currency bond and deposit ceilings remain unchanged at Baa3.