S&P upgraded the country’s credit rating to BB+: Opportunity to attract capital in the international arena

What is a rating? trust nation?

Just like a movie, a 5-star rating by experts will attract more viewers than a 3-star movie. Similarly, a country with a higher credit rating will also have more opportunities and incentives when borrowing capital in the international market, especially when that country is in an Investment rating area. And the Speculative level will have less opportunities. In rare cases, default is the lowest rating.

Currently, Vietnam is ranked by 3 organizations: S&P, Moody’s and Fitch Ratings.

In 2021, Vietnam is the only country in the world with a positive outlook by all three credit rating agencies Fitch, Moody’s, and S&P. (Illustration image – Photo: Investment Newspaper)

“Credit ratings assess a country’s ability and willingness to repay its debt obligations in the future. The higher the credit rating, the lower the borrowing costs and the ability to participate in the market. the better,” said Mr. Truong Hung Long, Director of the Department of Debt Management and External Finance, Ministry of Finance.

Corresponding to 3 rating agencies, Vietnam’s current rating position is at 3 different scores, with S&P being BB+, Moody’s being Ba3, Fitch being BB. However, the common point is that regardless of the rating of any organization, the credit rating of Vietnam is still at the Speculative level, although it is also approaching the Investment level. With S&P, there is only 1 level left for Vietnam to be promoted to Investment level, with Moody’s 3 ranks, and Fitch 2 ranks.

International credit ratings contribute to business enhancement

Similar to the national credit rating will bring benefits to the budget, credit rating for each business is becoming an increasingly urgent requirement. Although in Vietnam, currently only a few businesses have received international credit ratings and these ratings according to regulations cannot exceed Vietnam’s national credit rating, but in reality, demonstrate clear efficiency for businesses when actively participating in credit rating.

With Electricity of Vietnam (EVN), thanks to the credit rating, new businesses can borrow foreign capital without going through the Government guarantee process with a procedure that takes up to more than 4 years.

EVN’s member corporations, after being assessed for credit, do not need to borrow from the group, but can arrange international capital by themselves.

VPBank has also arranged an international loan of 300 million USD thanks to its credit rating. Not only is it a loan, but the credit assessment process also helps businesses improve their internal resources.

Currently, Vietnam has 2 enterprises licensed by the Ministry of Finance to conduct credit rating, but the number of credit rating contracts each year is less than 10 contracts.

Thus, it is important to form a credit rating culture, not only at the national level, but also in the domestic market, for each enterprise, regardless of whether it is raising capital domestically or internationally.

In 2021, Vietnam is the only country in the world that is assessed by all three credit rating agencies Fitch, Moody’s, and S&P with a positive outlook, with Vietnam’s plus point being its economic growth momentum. However, in order to upgrade the credit rating from Speculative to Investment in the next 8 years, there are still many challenges.

S&P recently upgraded Vietnam’s national credit rating to BB+, with a Stable outlook, how will it affect the credit ratings of the other two organizations? What are the key factors that help Vietnam promote the upgrade route, as well as spread the credit rating culture widely with domestic businesses?

Mr. Nguyen Minh Cuong, Chief Economist of the Asian Development Bank (ADB) in Vietnam, guest of section Financial Flow Spotlight (4/6), will partly answer the above questions, as well as provide additional perspectives on this topic. Please watch the video above!

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