Vietnam to achieve credit rating as set target

Economic growth is the foundation for credit rating organizations to consider upgrading the national credit rating for Vietnam. Illustration: ST

Many positive achievements

At the seminar titled 'National Credit Rating and Investor Relations' organised by the Ministry of Finance on September 18, Mr. Truong Hung Long, Director of the Department of Debt Management and External Finance (Ministry of Finance) said that the improvement of the national credit rating is the result of the synchronous and effective implementation of measures to stabilize the macro economy and strengthen the financial and banking system of the Party, National Assembly and Government; at the same time, it is also the result of ministries and agencies from actively exchanging and sharing information with credit rating organizations.

The improvement of the national credit rating has a very positive meaning, creating a spillover effect for the entire economy, on the one hand contributing to enhancing the country's reputation, on the other hand increasing the confidence of international investors, improving the cost of mobilizing foreign capital for both the Government and businesses. This is extremely important when ODA loans and preferential loans for Vietnam are gradually decreasing.

Affirming that Vietnam has recognized the importance of national credit rating, Mr. Truong Hung Long said that in 2022, the Ministry of Finance coordinated with relevant agencies to develop and submit to the Prime Minister for approval the National Credit Rating Improvement Project by 2030. In the project, Vietnam set an important goal of raising Vietnam's investment rating grade by 2030. After more than two years of implementing the project, Vietnam has achieved some positive results.

"Amid negative fluctuations in the global economy in 2022, countries around the world faced instability, risks and consequences from geopolitical conflicts, many countries have been downgraded by credit rating organizations, but Vietnam is among the few countries in the world that have had their national credit rating upgraded by the two credit rating organizations Moody's and S&P", Mr. Truong Hung Long emphasized.

Accordingly, in 2022, S&P raised Vietnam's national credit rating by one place, from BB to BB (Stable outlook); Moody's raised Vietnam's national credit rating from Ba3 (Positive outlook) to Ba2 (Stable outlook). Then, in 2023, Vietnam's credit rating was raised by Fitch again, from BB to BB (Stable outlook).

Mr. Truong Hung Long said that this result shows that Vietnam's national credit rating according to S&P and Fitch's rankings is only 1 place away from the investment grade, and 2 places away according to Moody's rankings, helping Vietnam get closer to the goal of achieving the investment grade by 2030 set out in the project.

Improving national credit rating through information transparency

According to Mr. Karby Leggett, Head of Global Official Institutions Group (Standard Chartered Bank), this is the right time for Vietnam to discuss national credit rating. Improving national credit rating helps Vietnam reduce capital mobilization costs, allowing the Vietnamese Government to be flexible in mobilizing capital for the state budget, investing in infrastructure, maintaining recurrent spending on health, education, etc.

Affirming that Vietnam's strengths affect credit ratings, Mr. Karby Leggett also mentioned areas considered as Vietnam's strengths such as economic growth; public debt; foreign investment flows, etc.

“In terms of economic growth, Vietnam is moving into a period of high and sustained growth, helping accelerate the credit rating coefficient. Notably, during the Covid-19 pandemic, when neighbouring countries all suffered a major shock in economic growth and sharp decline in economic growth, Vietnam, on the contrary, did not experience negative growth. This has created new confidence in the future growth rate that the Vietnamese economy can achieve, which is the foundation for credit rating organizations to consider upgrading the national credit rating for Vietnam.

In addition, Vietnam's public debt has been on a steady downward trend over the past years; foreign investment flows continue to increase investment in Vietnam, creating miraculous economic growth. The representative of Standard Chartered Bank believes that Vietnam's economic growth in the next 4-5 years will be very good.

In addition to credit rating, experts also discussed the implementation of investor relations. Mr. Arne Fraemk, Head of the the Strengthening Public Financial Management Project under the Macroeconomic Reform and Green Growth Program of GIZ Vietnam, said that capital mobilization is extremely important, but also creates risks for State credit, while geopolitical tensions in the world continue to affect relationships with investors - creditors, in which, investor relations are extremely important.

"We are making every effort to support Vietnam. The Vietnamese Government will benefit more from greater cooperation with investors through transparency and sharing of information on financial reports. Vietnam has set a national credit rating target by 2030 of enhancing global credibility to reduce borrowing costs,” said Mr. Arne Fraemk.

Regarding this issue, Mr. Karby Legget also recommended that investors now want to access high-quality information from data transparency. Countries must register for special data disclosure standards or extended special data disclosure standards; must publish data on government operations, public debt and foreign debt in a timely manner with the latest data not more than 12 months old; must aggregate data quarterly... therefore, it is necessary to establish a specialized government agency responsible for investor relations.