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Moody's maintains B1 rating, negative outlook on Vietnam
Moody's Investors Service says the outlook on Vietnam's B1 foreign and local currency bond ratings remains negative.
According to Moody's latest annual report on Vietnam, "Credit Analysis: Vietnam," the country has made much progress in recovering from a period of macroeconomic instability, but continues to face contingent risks that justify the negative outlook.
Moody's assessment of Vietnam's sovereign creditworthiness is based on four factors: economic strength (low); institutional strength (low); government financial strength (low); and susceptibility to event risk (medium).
Despite rapid growth for much of the past decade, Moody's assessment of Vietnam's economic strength reflects very low GDP per capita. Over the longer-term, the country's competitiveness may be challenged by greater structural improvements in other regional economies.
Macroeconomic stability has been restored following the implementation of policy tightening measures since early 2011. Although inflation has fallen markedly, concerns over economic growth have emerged. Moody's expects real GDP growth to average 5.0% over the next two years.
Vietnam's rating is constrained by institutional weaknesses. Poor data transparency hampers a precise assessment of the economy's vulnerabilities and trends, while the effectiveness of governance has decreased in recent years.
Public finances remain manageable, and Vietnam's fiscal and debt ratios are comparable to other similarly-rated countries. The balance of payments has stabilized and the accumulation of foreign exchange reserves has resumed. However, external vulnerabilities also continue to be more pronounced versus the period prior to the global financial crisis.
The negative outlook reflects the uncertainties related to from the financial health of the banking system and the state-owned enterprise (SOE) sector. Moody's believes that given the persistence of poor data transparency in Vietnam, the ratio of non-performing loans in the banking system has been underestimated.
Moody's report is a yearly update to the markets and is not a rating action.
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