(Tuoi Tre) - Standard & Poor's (S&P) has revised the outlook on Vietnam to stable from negative.
The revision is due to the government’s successful drive to bring down sky-high inflation.
“The outlook revision reflects our assessment of a reduction in the risks to macroeconomic and financial stability in Vietnam” due to this tight credit policy, said the agency’s statement.
Vietnam last year had to switch its focus from economic growth to stabilization to deal with soaring inflation, price hikes, and other challenges, including shrinking foreign reserves, an expanding trade deficit and the devaluation pressure for its currency, the Vietnam dong.
“By continuously rising interest rates throughout the year 2011, the government reined in inflation from the peak of 23 percent last August to 8.34 percent year-on-year this May,” according to AFP, citing S&P statement.
Key indicators such as credit growth, the level of foreign exchange reserves, and domestic currency interest rates have improved over the past 18 months.
"We expect Vietnam to maintain these improvements as the government has expressed its intention to keep price stability high on its policy priorities," said Standard & Poor's credit analyst Kim Eng Tan.
“The stable outlook on the ratings reflects our view that Vietnam will maintain an appropriately tight economic policy stance until there are clear signs of macroeconomic instability receding, including sustained single-digit rates of inflation.”
“This would allow fiscal, external, and economic indicators to remain close to current levels or improve over the next two to three years.”
However, fiscal tightening has also caused economic growth to slow to 4.0 percent in the first quarter of 2012, the weakest pace in three years, forcing the central bank to slash interest rates three times this year already.
Vietnam’s economy grew 5.9 percent last year, just below the six percent target. The government is aiming for a 6.0 to 6.5 percent expansion this year.