Moody's Reaffirms Positive Outlook for Vietnam's Bonds

The U.S. rating agency Moody's Investor Service reaffirmed its Ba3 foreign and local bond ratings with positive outlook for Vietnam, a state media reported.

 

Moody’s said in an annual report on Vietnam last week that Vietnam’s bond ratings were supported by the progress made in externally oriented development policies and state enterprise restructuring.

 

Trade liberalization and structural reforms in the state-owned enterprises and financial sectors were helping to shift Vietnam’s insufficient and state-directed economy towards one that was increasingly incorporating market incentives, promoting sustainable economic growth and ultimately reducing contingent fiscal liabilities.

 

Favorable external developments contributed to export growth of 19 per cent in the first nine months, said Moody's vice president Tom Byrne.

 

Although surging investment-related imports had widened the current trade deficit, capital inflows had sharply boosted foreign exchange reserves to US$21 billion-22 billion, which help reduce vulnerability to external shocks.

 

The bond ratings, along with Moody’s assessment of a high risk of a payment moratorium in the event of a government bond default, formed the basis for Vietnam’s foreign-currency country ceiling for bonds of Ba2.

 

“Vietnam’s public finances are manageable even as the government runs moderately large deficits to support investment and boost income growth,” Byrne said.

 

The overall policy stance supported rapid economic growth had contributed to inflationary pressures. Vietnam’s real output growth has picked up, making it likely that GDP growth for 2007 would reach 8.5 per cent, up from 8.2 per cent in 2006.

 

Byrne said the Vietnamese government intended to tap the global bond market again for lending to state-owned companies.

 

Moody's revised Vietnam's Ba3 foreign-currency government bond rating outlook to positive from stable in March this year. (VIR)