S&P upgrades Vietnam ratings

"We raised our sovereign ratings on Vietnam to reflect our view of improvements in the government's administrative processes," S&P stated Thursday.

In recent years, the government had implemented measures that helped close the gap on lapses in repaying guaranteed debt.

The ratings upgrade is also supported by Vietnam's robust economic prospects and sound external position. Vietnam continued to attract strong foreign direct investment (FDI) flows, despite pandemic disruptions.

"We expect export-led growth and strong investment to keep the economy's trend growth rate well above the average of its peers," S&P said.

Vietnam's gross domestic product (GDP) per capita has risen quickly in the past few years from a relatively low base, and the ratings agency expects GDP per capita in 2022 to reach $3,868, against the country’s target of $3,900.

S&P forecasts GDP growth to hit 6.9 percent this year (compared to 2.6 percent last year), adding that the country would likely grow 6.5-7 percent from 2023 onward.

"Vietnam's attractiveness as a premier destination for foreign direct investment in Southeast Asia, along with its young, increasingly educated, and competitive workforce, should help keep the country's long-term development trajectory intact despite temporary labor market disruptions from Covid-induced lockdowns."

But the ratings agency said that risks to economic growth are tilted toward the downside, because Vietnam's export-led economy relies on strong external demand.

Rising inflation and financing conditions, as well as geopolitical risks, could dampen global growth and reduce demand for Vietnamese exports, it added.