Singapore, August 08, 2012 -- 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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