Right path to further raise Vietnam's credit rating

Dr. Vu Dinh Anh, economist at the Ministry of Finance’s Price Market Research Institute

What does S&P’s upgraded rating mean for the economy in the context of limited development capital sources?

That Vietnam’s credit rating was raised to BB+ is a positive assessment of a reputable credit rating agency. This shows that Vietnam maintains growth and macroeconomic stability while controlling and minimising financial risks.

S&P also forecasts Vietnam’s 2022 GDP growth to be at around 6.9 per cent with a long-term trend of 6.5-7 per cent per year from 2023. S&P also gave a good assessment of the policies and mechanisms Vietnam is implementing.

S&P recommends that Vietnam continues to improve governance, in particular data quality and transparency, and its resistance to external influences. What difficulties will be encountered in carrying out these tasks?

These improvements have several issues. First, Vietnam is still in the process of building a data system according to international standards. For example, in the annual statistical yearbook of Vietnam, data on finance, banking, and payments remains patchy, and not in line with international standards.

Thus, it is difficult to make a comprehensive and accurate assessment of the economic situation of Vietnam as well as related to issues of national governance.

Second, Vietnam’s information systems are still not connected to each other. The State Bank and the Ministry of Finance still keep their own data, and so do the specialised ministries. The sharing of data has not yet reached the national level. That is not to mention informational and local data, as well as between localities.

Vietnam is in the process of improving, both in terms of accuracy and usefulness in national governance associated with state management and e-government. One thing is for sure, Vietnam must continue to perfect its governance at both central and local levels.

Do you think that improving national governance will reduce state intervention in the market?

State intervention in the market depends on two things. If the level of the market creates many defects, the state must intervene more. The other factor depends on the qualifications of the government. If the government does not manage macro policies, financial, and fiscal policies well, the state will have to intervene directly.

In the national credit rating and governance index are still concerns of credit rating agencies. But these do not change their meaning when the government and enterprises borrow foreign capital.

Previously, the government and borrowers had to bear higher interest rates due to low credit ratings. But when credit ratings are raised, interest rates would improve.

What is the main concern of credit rating agencies when rating countries?

The three rating organisations Moody’s, S&P, and Fitch are reviewing a country’s credit rating on four main factors: institutional capacity, economic and monetary performance, public finance, and external finance.

The national upgrade means not only higher prestige for the Vietnamese government in the international financial market but also offers more favourable conditions for large corporations and local financial institutions to participate in global markets.

If Vietnam continues to have stronger and more appropriate reforms, the national ranking will certainly further climb.