August 25, 2019 21:40

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Credit upgrade - great opportunity to attract investment

10:53 | 25/04/2019

VCN - When an economy integrates with the world economy, credit ratings are needed. This is an index for direct investors, indirectly referring to assessing the macroeconomic situation, capital absorption capacity, debt repayment capacity and economic, political and social risks as well as investment opportunities.

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The credit rating is very important to the country's reputation, affecting Vietnam's community and international investors.

Summing up many impact factors

Recently, the credit rating organization Standard & Poor’s (S&P) has increased Vietnam's long-term national credit rating by 1 step from BB- to BB, the prospect of "Stable" after 9 years. The reasons S&P put forward when raising credit ratings for Vietnam include political stability, solid economic growth for a long time; markedly improved institutional foundation of Vietnam and it is a country with potential for development. The prospect of "Stable" shows the forecast that Vietnam's economy will continue to maintain a fast and sustainable growth momentum. S&P rated Vietnam's economy as highly diversified. A solid macro foundation continues to support the performance of the foreign invested sector as well as export enterprises, especially in the field of processing and manufacturing.

Further analysis of the cause, Mr. Vo Huu Hien - Deputy Director of Department of Debt Management and External Finance, Ministry of Finance said: The administration of the Government of Vietnam in recent years shows the orientations of clear policies, contributing to improving the investment environment, ensuring macroeconomic balance and curbing inflation effectively. In addition, the Government's drastic reforms have contributed to maintaining Vietnam's position as an attractive and friendly destination. The signing of agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), Regional Comprehensive Economic Partnership (RCEP), EU-Vietnam Free Trade Agreement (EVFTA) and other free trade deals are expected to increase trade position, reach large markets, promote trade competition and promote Vietnam's legal environment reform.

In addition, the management of financial policy is more and more effective, reflected in the commitment to improve the financial situation clearly through medium-term financial and budget framework. The restructuring of revenues and expenditures of the state budget changed positively. The fiscal position is stable and within the target set by the Government. Positive budget revenue, gradually improve the efficiency of spending, thereby reducing the state budget deficit. Public debt gradually decreased. The restructuring of state budget and strengthening of public debt management changed positively, foreign debt decreased gradually; prolonged Government bonds reduced risks to the list of Government debt, public debt and guaranteed national financial security. In operating monetary policy with positive changes, especially the banking system is strengthened, efforts to resolve bad debts, and foreign exchange reserves have increased continuously. The effective management of monetary policy contributes to curbing inflation.

Increase trust for investors

In addition to the objective impacts from the overall socio-economic development of the country, being aware of the importance of credit ratings for national prestige affects the community. With Vietnam's international investors as a focal point, the Ministry of Finance has made great efforts, focusing a lot of time on this work. Mr. Vo Huu Hien said the Ministry has actively collected, analyzed and developed an overview of the socio-economic situation; maintaining regular information to explain and demonstrate the positive results of the economy. Along with that, it is proactive to meet and discuss with senior leaders of S&P Evaluation Committee during the mid-term and annual meeting of the International Monetary Organization/World Bank (IMF/WB) to reflect and update the socio-economic situation of Vietnam.

Furthermore, in order to carefully prepare for the working session with senior leaders and analysts of S&P in Vietnam (March 12 to March 16, 2019), the Ministry of Finance actively coordinated with relevant agencies to prepare thoughtful content to serve the working phase. For example: Develop an overview report on the socio-economic situation in 2018 and economic prospects 2019; actively review the evaluation reports of S&P from 2010 to present; carefully prepare the contents to show progress in state budget restructuring, public debt and reform of state-owned enterprises towards sustainability, increasing the efficiency of the state-owned enterprises sector.

At the same time, direct exchange with representatives of the State Bank of Vietnam, the State Capital Management Committee at enterprises to arrange senior leaders to work with the delegation to clarify the S&P issues and concerns related to credit growth, bad debt, banking sector restructuring. The Ministry of Finance met and exchanged directly with the Ministry of Industry and Trade and the Ministry of Planning and Investment before the official meeting with S&P to clarify the prepared contents to help the unit understand S&P's concerns on each field managed by the unit to prepare good content for the meeting.

Along with Vietnam's socio-economic achievements and with the efforts of the Ministry of Finance and related agencies, S&P has decided to raise Vietnam's long-term national credit rating.

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Sharing the significance of raising the credit rating of international organizations in general and of S&P in particular, the representative of the Department of Debt Management and External Finance said that it is very important to improve national prestige, increasing confidence for international investors, both direct and indirect investors. Besides, the cost of mobilizing foreign capital of both the Government and businesses will decrease. This is very important when ODA funds for Vietnam are decreasing and may end in 2020.

The credit upgrade also brings a positive impact on the ratings of domestic banks. For example, in 2018, when the national credit rating was increased, even in August 2018, Moody’s upgraded its rating for 14 Vietnamese commercial banks.

By Hong Van/Bui Diep