HANOI: Moody’s Investors Service (Moody’s) has affirmed Vietnam’s long-term credit rating at Ba3 and raised its outlook for the country to “positive”.
The drivers of the positive outlook include signs of improvements in fiscal strength and potential improvements in economic strength that may strengthen Vietnam’s credit profile over time, report agencies.Sustained fiscal consolidation has led to improvements in fiscal and debt metrics, which Moody’s expects to be only briefly interrupted by the pandemic. Moreover, Vietnam’s economic strength may benefit from global shifts in production, trade and consumption following the coronavirus pandemic and support Vietnam’s economy.
Cyclical and structural features may raise economic strength, driven by Vietnam’s integration in Asian supply chains as well as its ability to capitalise on the rise in demand for electronics, smartphones, furniture, and other manufactured goods that is likely to endure beyond the pandemic. Vietnam’s share of global exports has risen rapidly since 2010 and has now caught up to peers in Southeast Asia. Vietnam stands to continue to benefit from shifts in production and trade, including as a party to major trade agreements for the region, including the recently concluded Regional Comprehensive Economic Partnership, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, and a bilateral free trade agreement with the EU, one of its largest export markets. As companies aim to diversify their production locations in Asia, Vietnam will continue to attract foreign direct investment (FDI) due to competitive labour costs, political stability, and preferential incentives favouring trade and investment.