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Moody's: Negative outlook for Vietnam's B1 rating reflects continued BOP uncertainty
Moody's Investors Service says its negative outlook for Vietnam's B1 rating reflects concerns about the sustainability of the country's balance of payments despite the government's recent macro-stabilization measures.
Moody's annual sovereign report on Vietnam provides an updated analysis on the rating and does not constitute a rating action.
The report notes that Vietnam's B1 foreign currency and local currency ratings were derived from a methodological assessment of low economic resilience and low financial robustness. Strong growth over the past decade has led to large developmental gains, but has not been matched by improvements in institutional quality, in comparison to the country's rating peers.
Vietnam's fiscal and debt metrics are still well-positioned compared to those of its rating peers, but event risk has risen as a result of inconsistent macroeconomic policies that have not sufficiently addressed overheating pressures.
Moreover, the deterioration in Vietnam's external payments position, coupled with an unfavorable outlook for contingent liabilities, is pressuring the rating downward.
A change in the rating outlook to stable would depend largely on the success of the government's recent tightening measures in arresting inflationary pressures and containing exchange rate volatility. However, if the already low level of foreign exchange reserves were to erode further, the rating would be subject to additional downward pressure.
The principal methodology used in this rating was Moody's Sovereign Bond Methodology published in September 2008.
The report is entitled "Credit Analysis: Vietnam." It can be accessed at www.moodys.com.
Please see ratings tab on the issuer/entity page on Moodys.com for the last Credit Rating Action and the rating history.
Theo Moody’s
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