S&P affirms Vietnam’s long-term rating outlook stable, predicts 5.8% economic expansion

S&P Global, the US-based credit rating agency, has affirmed a 'BB+' long-term sovereign credit rating and a 'B' short-term rating for Vietnam, adding that its long-term rating outlook is stable.

In a Thursday release, S&P Global says Vietnam's economy will accelerate over the next 12 months as global demand picks up and the country gradually resolves its domestic challenges.

“This should keep the government's debt repayment burden stable,” it says.

The sovereign ratings on Vietnam 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,” the report says.

It also mentions disadvantages including modest GDP per capita, banking sector vulnerabilities and evolving institutional settings.

5.8% GDP growth

Following Vietnam’s relatively lackluster GDP growth of 5.05% in 2023, S&P expects healthier global demand conditions to support an acceleration to 5.8% in 2024.

“Vietnam’s export-led economy relies on strong external demand, which is firming,” the report says.

The upcycle in the semiconductor industry will also play a role in propelling Vietnam's growth this year, as exports from the industry increase, it adds.

The report anticipates Vietnam’s GDP growth at 6.7% in 2025, 6.7% in 2026, and 6.7% in 2027.

It estimates the country’s nominal GDP to accelerate from $429.7 billion in 2023 to $452.4 billion in 2024, $479.7 billion in 2025, $521.5 billion in 2026 and $566.5 billion in 2027.

S&P forecasts Vietnam's GDP per capita at about $4,500 at the end of 2024. Trend growth, as measured by the country's 10-year weighted-average increase in real GDP per capita, of about 5% is significantly higher than the median of peers at a similar income level, it notes.

Vietnam remains an attractive destination for foreign investment, particularly in the manufacturing sector, as firms continue to diversify their operations in the region. The agency attributes Vietnam’s attractiveness to its macroeconomic stability and well-developed logistics network for exports, which can support the manufacturing sector's attractiveness for global firms in the electronics, mobile phone and textile industries.

Power blackouts amid a heatwave in mid-2023 are an indicator of strong demand for foreign investment in the country and the government has moved to “avert similar events in the future” by upgrading the infrastructure, the report observes.

Meanwhile, problematic issues in the country, including bureaucratic rigidities and a slowdown in the country's property sector, are being resolved gradually, it adds.