In its decision to upgrade the credit outlook, announced on 4/5, Moody's noted improving institutional and governance quality, driven by accelerated administrative, legal, and public sector reforms since late 2024. The economy's competitiveness is also strengthening through digitalization, infrastructure investment, labor skill enhancement, and capital market development.

Moody's also observed a reduction in risks from US trade protectionism compared to previous forecasts. Concurrently, Vietnam maintains positive economic growth and stable foreign direct investment (FDI) inflows, solidifying its position in global supply chains.

The global rating agency affirmed the Ba2 rating, citing strong growth potential, robust foreign exchange reserves, a diverse and stable economic structure, and continued appeal to foreign investors. Low and stable government debt, strong debt service capacity, and decreasing reliance on external financing also contribute positively.

However, Moody's noted that the rating remains constrained by structural limitations. Risks from the banking system and real estate market persist. Ongoing reforms are expected to mitigate these risks. Additionally, geopolitical factors, such as the Middle East conflict, could exert short-term pressure through energy prices, transportation costs, and inflation.

Cargo containers at Cat Lai Port (TP HCM) on the afternoon of 4/2. *Photo: Thanh Tung*

The agency indicated that Vietnam's credit rating could be upgraded if policy reforms address institutional and infrastructure bottlenecks. Increased foreign direct investment (FDI) into high-value sectors like semiconductors and artificial intelligence (AI) would also support an upgrade. Furthermore, macroeconomic stability and enhanced banking system management are key factors.

Conversely, a downgrade could occur if reforms stall or reverse, coupled with rapidly increasing economic leverage posing financial risks. Objectively, escalating geopolitical tensions leading to declines in exports and FDI could also impact the credit rating.

However, Moody's emphasized that the 'positive' outlook indicates a low probability of a downgrade. Vietnam has held a Ba2 credit rating from the agency since 9/2022.

In a statement on the same day, the Ministry of Finance stated that Moody's decision to upgrade the outlook "reflects the international community's high regard for the leadership and management efforts of the Party, National Assembly, and Government." The Ministry added that it will coordinate with Moody's and other international credit rating agencies to enhance assessment quality and gradually improve the national credit rating.

Phuong Dong