US-based credit rating service Standard and Poor’s (S&P) says the economic outlook for Vietnam is stable but warned of continuing structural impediments in the nation’s economy. S&P affirmed its BB/B foreign currency and BB+/ B local currency sovereign credit ratings for Vietnam, now experiencing annual growth rates of more than 8%.
“The stable outlook on the ratings encompasses our expectation that the momentum of structural reforms in Vietnam will be sustained in the near term, ” S&P said in a statement released from Singapore. “This will further strengthen investor confidence in the country and help maintain high rates of economic growth.”
However, S&P warned that Vietnam’s “productivity is held down by structural impediments and the lack of a sophisticated legal and regulatory system.” One “area of inadequacy” cited was the banking sector in which key institutions were” still adjusting to commercial operations from policy lending. ”
S&P credit analyst Kim Eng Tan said that the ratings on Vietnam reflected its low-income economy and developing financial system, both of which increased the vulnerability of the economy to severe shocks that could significantly increase the public financial burden.
S&P said the outlook could be revised upward if Vietnam accelerates the reform process or strengthens financial stability, such as by “substantially improving transparency in the banking system through the successful equitisation of one or more large State-controlled banks.”