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Moody's confirms Vietnam's ratings after review for downgrade

Moody's confirmed Vietnam's local- and foreign-currency issuer and senior unsecured ratings at Ba3, concluding a review for downgrade initiated Oct. 9 over concerns about delayed payments on government obligations.

The rating agency said the confirmation reflects its view of the Vietnamese government's "enhanced attention" to upcoming payments of debt obligations, reducing the risk of renewed delays. The Ba3 rating also reflects the agency's expectation that the government's direct debt burden will gradually decline to around 48% of GDP by 2020 from almost 53% in 2016 and that debt affordability will improve.

The outlook is negative, reflecting Moody's view of persistent risks that the Vietnamese government will again delay on paying debt obligations. In particular, the rating agency noted the lack of transparency on the extent of the government's guaranteed obligations and the resources it plans to use to meet them.

A credit rating downgrade would be likely if Vietnam again delays on its debt payments, signaling more persistent administrative deficiencies than the rating agency assumes. Meanwhile, Vietnam's credit outlook could be revised to stable if debt payments are made consistently on time, with a decline in the debt burden coupled with strong economic growth and competitiveness.