S&P’s upgrade of Vietnam’s sovereign credit rating was grounded on Vietnam’s strong economic recovery prospects following the progressive lift of domestic and cross-border mobility restrictions, outstanding improvement in vaccination rates, and flexible shift in COVID-containment policy. The significant improvements in government administrative processes, in particular the governance quality of government guaranteed debt obligations, robust economic growth prospects, strong external position and resilient FDI flows despite pandemic disruptions were also factored in S&P’s decision to upgrade Vietnam’s ratings.
The stable outlook reflects S&P’s expectations that over the next 12-24 months, Vietnam’s economy will continue to recover from the challenges posed by the pandemic over the past two years, which will support the external position and contain fiscal deficits.
In S&P’s view, Vietnam’s GDP per capita has risen quickly in the past few years and is expected to reach a 10-year weighted average growth of real GDP per capita of approximately 4.8 percent, significantly higher than the average of Vietnam’s peers at a similar income level. S&P forecasts real GDP will grow 6.9 percent in 2022 and maintain a long-term trend of growing 6.5-7 percent from 2023 onward. Vietnam’s macroeconomic stability combined with advantages in competitive labour, improved education standards and favorable demographics have been key growth drivers in strengthening Vietnam’s attractiveness as a favourable destination for global enterprises in manufacturing sector, creating momentum for exports and consumption growth.
On the social front, S&P acknowledges that the Government of Vietnam has generally delivered strong development outcomes in the past decade, strengthening strong social compact between the government and citizens.
On the fiscal front, S&P also recognises that Vietnam’s public finances have been stable despite pressures posed by the pandemic. This agency expects the fiscal deficit to be temporarily widened due to the implementation of the social-economic recovery program; however, S&P states that the policy space is ample in the context of sharp reduction of public debt.
S&P’s upgrade of Vietnam’s credit ratings amid evolving challenges across the globe reflects the agency’s appreciation of the proactive measures by the Party, National Assembly and the Government to stabilise the macro-economy and consolidate socio-political foundation. This is also testament to the agency’s recognition of the effective coordination led by Ministry of Finance, related ministries and agencies, to communicate Vietnam’s policies and achievements to the international community. Against the backdrop of challenging global developments and deep scarring effects of the pandemic leading to over 30 downgrades by Credit Rating Agencies in the year to date, Vietnam is one of the only two sovereigns in the Asia-Pacific region to have been upgraded this year – the other being Taiwan (China).
The Ministry of Finance will continue to provide information and updates to allow credit rating agencies and international institutions to form a comprehensive assessment of Vietnam’s strong and improving credit profile.