Strong growth potential to support stabilisation in VN’s debt burden
Strong growth potential to support stabilisation in VN’s debt burden: Moody’s
Strong economic growth will likely continue in Vietnam over the next few years and support a stabilisation in debt, Moody's Investors Service said on August 21.
Workers produce electronic components at the Japanese-invested Canon factory in the Pho Noi A Industrial Park, Hung Yen province (Photo: VNA)
Hanoi (VNA)– Strong economic growth will likely continue in Vietnam over the next fewyears and support a stabilisation in debt, Moody's Investors Service said onAugust 21.
It said the growth will be supported by theeconomy's rising competitiveness, healthy trade flows and robust consumption,but banking system risks and a history of susceptibility to destabilisingfinancial market cycles remain a constraint on broader economic strength.
Moody's conclusions are contained in itsjust-released report "Government of Vietnam: FAQ on prospects for growth,trade and government debt".
The report says that investment is largelyresponsible for the 6-percent growth recorded over the last decade for theVietnamese economy, but productivity will increasingly drive headline growth asthe economy moves up the value-chain and the role of the private sectorincreases.
These competitiveness improvements, together witha mix of healthy trade flows and robust consumption, will support average GDPgrowth of 6.4 percent between 2018-2022, which is nearly double the 3.5-percentmedian for Ba3-rated sovereigns like Vietnam.
Meanwhile, the effects of the ongoing trade disputebetween the US (Aaa stable) and China (A1 stable) may be detrimental forVietnam if tariffs are extended to products within the mobile phone supplychain - that Vietnam specializes in - or affected other economies with which ithas strong trade ties, such as the Republic of Korea (Aa2 stable).
At 52 percent of GDP, the government debt is nowlargely in line with the median of about 50 percent for Ba-rated sovereigns.The rapid pace of nominal economic growth will stabilize debt at this level.Moreover, the structure of debt has improved, with lengthening maturities and adeclining share of foreign-currency debt limiting Vietnam's vulnerability tofinancial shocks, Moody’s added.-VNA
The profitability of Vietnamese banks is strengthening as robust economic growth fuels credit demand and supports an improvement in asset quality, but challenges are also apparent, Moody’s Investors Service said in a recent report.
Moody’s Investor Services projected Vietnam’s annual GDP growth to stay at around 6.4 percent during the 2018-2022 period in its latest report issued on August 10.
Moody's Investors Service, on August 10, leveled up the Government of Vietnam's long term issuer and senior unsecured ratings from B1 to Ba3 and changed the outlook from positive to stable.
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Workers produce electronic components at the Japanese-invested Canon factory in the Pho Noi A Industrial Park, Hung Yen province (Photo: VNA) 
