The stable outlook reflects S&P’s expectation that Vietnam’s economy will continue to expand rapidly.
S&P Global Ratings has announced it has retained Vietnam’s sovereign credit rating at BB, with a stable outlook, according to the Ministry of Finance.
The move is a reflection of the strong potential for recovery in Vietnam’s economy following a period of deceleration due to the COVID-19 pandemic.
S&P evaluated that Vietnam’s solid growth achievements over recent years will continue to help maintain the country’s sovereign credit rating.
In a scenario where the global pandemic is basically under control by the end of 2020 or early 2021, S&P forecasts that Vietnam’s real GDP growth will recover in 2021 and from 2022 onward will approach the development target the country has set in the long term, of 6 to 7%.
Globally, since the beginning of April, S&P has adjusted the negative credit rating of 32 countries.
While working with S&P to evaluate the sovereign credit rating in late April, the Ministry of Finance and relevant agencies had presented convincing evidence about the adaptive capacity of Vietnam’s economy, which has been clearly illustrated in this challenging global context.
Apart from successfully curbing the COVID-19 pandemic, Vietnam has supported, cooperated, and shared its experience in fighting the disease with other countries and international organizations, which has been greatly appreciated by the international community, the ministry said.
This outcome demonstrates the deep connection between the Vietnamese Government and people, which facilitated the strong recovery of the economy after COVID-19, it added. – NDO
Domestic and external risks remain
While Vietnam is well-placed to recover following the containment of the pandemic, the economy faces a variety of domestic and external risks.
On the external front, trade disputes between major economies and the impact of the Covid-19 pandemic, especially on its key trading partners, will very likely undermine export momentum over the short term.
According to S&P, Vietnam’s key trading partners such as China, South Korea, the US, and Japan would face substantial economic damage from the pandemic over the near term.
Given the extraordinarily large share of trade relative to the size of its economy and exposure to risks from disruption to the global supply chain, Vietnam faces elevated risks associated with the severe decline in global trade flows.
Domestically, a higher fiscal deficit this year and moderate public indebtedness mean that new sources of funding will likely be needed to continue to spur strong infrastructure investment. Relatively weak banks in Vietnam, characterized by low levels of capitalization and mixed asset quality, also pose a degree of risk to the economic outlook.
Last April, S&P upgraded Vietnam’s rating to BB from BB-, the first time since 2010, on the back of the economy’s strong macroeconomic performance and improved government institutional settings. – HanoiTimes