Vietnam’s ratings affirmed at “BB+” with stable outlook
Illustrative image (Photo: Internet)

The agency forecast that Vietnam's economy will accelerate over the next 12 months as global demand picks up and the country gradually resolves its domestic challenges. It highlighted that the ratings reflect the country's strong economic growth outlook, moderate government debt levels, and generally sound external position. As multi-national conglomerates diversify their operations in the region, Vietnam will likely continue to attract substantial foreign direct investment (FDI) inflows to its export manufacturing sector over the next several years.

It predicted that Vietnam's economic growth will pick up to 5.8% this year, after cooling to 5% in 2023. The upcycle in the semiconductor industry is expected to play a role in propelling Vietnam's growth this year, as exports from the industry increase.

On the services side, cross-border travel is recovering, including a surge in Chinese tourists. Domestic demand is also recovering, though it remains slower than headline GDP growth. It expected public investment to gradually accelerate over the coming years, primarily from the State budget.

Over the next three to four years, Vietnam's real GDP growth rate was expected to return to its long-term trend of 6.5%-7.0%.

Despite the immediate stresses, Vietnam's economic prospects remain healthy, it said. The economy is increasingly diversified, with a booming manufacturing sector that is largely funded by FDI. The country's attractiveness as a destination for FDI in Southeast Asia with a young, increasingly educated, and competitive workforce should help keep long-term development intact.

Vietnam's macroeconomic stability and well-developed logistics network for exports have supported the manufacturing sector's attractiveness for global firms in the electronics, mobile phone, and textile industries. These FDI-oriented segments continue to fuel domestic activity, with better employment opportunities and higher wages powering private consumption growth, said the S&P Global Ratings.

Trade performance has improved markedly so far this year, following a higher current account surplus in 2023. Both exports and imports will likely return to healthy growth rates in 2024. In its view, the current account surplus will remain elevated, at about 5.5% of GDP this year, before moderating toward its long-term trend from 2025 onward./.