Moody’s upgrade of Vietnam’s sovereign credit rating to Ba2 reflects improved economic strengths relative to peers and resilience against external macroeconomic shocks, that are indicative of strengthened policy effectiveness. Moody’s expects Vietnam’s economy to continue to benefit from supply chain reconfiguration, export diversification and continued inbound investment in manufacturing. The upgrade also reflects Vietnam’s firm fiscal footing which is underpinned by well-contained borrowing costs, prudent fiscal stance and improved government liquidity. This is driven by the ongoing transition from external concessional borrowing toward financing from domestic market with low cost and longer tenors.

Moody’s acknowledges that Vietnam’s economic strengths are bolstered by improved competitiveness and the deepening of participation in global value chains. The growing competitiveness in manufacturing sector which has outperformed regional peers has been driving the rise in GDP per capita. The focus on multiple regional and bilateral trade agreements has affirmed Vietnam’s entrenched position in global value chains. These trade agreements are expected to strengthen Vietnam’s competitive position in lower-value products, while placing the country firmly in higher-value-added regional tech supply chains.

Fiscal policy effectiveness is noted as one of the key factors attributing to Moody’s upgrade. The growing emphasis on medium term budget planning, transition to borrowing from domestic institutional investors at low cost and longer terms contribute to sustained stable debt to GDP well below the statutory ceiling of 60%. Fiscal flexibility is at the same time preserved amid the ongoing economic recovery. The Government are now embedding measures in fiscal policy planning to address long-term challenges such as environmental risks and raise investment in education and worker training to support higher labour productivity and employment in higher value-added activities.

Moody’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 leading to over 30 sovereigns being downgraded by Credit Rating Agencies in the year to date, Vietnam is the only sovereign in the Asia-Pacific region and one of four sovereigns in the world to have been upgraded this year by Moody’s.

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./.