The delayed payment on a Vietnamese government-guaranteed loan in September was paid in full within the month and the administrative problems that gave rise to this delay are being addressed. Therefore, the delayed payment does not have an immediate impact on the rating, Fitch Ratings has said in a statement.

Moody's Investors Service on October 9 said it would place Vietnam’s Ba3 sovereign rating under review for downgrade as the government delayed in paying an obligation.

During a three-month review period, Moody's will assess the practices and systems the government has or is instituting, to ensure reliable, timely, and smooth payment of all obligations. The agency said it would downgrade Vietnam's rating if the rating review concludes that administrative gaps are such that a non-negligible risk of future delayed payments remains.

The Vietnamese Ministry of Finance on October 10 stated the Vietnamese government has always honored the responsibility of the guarantor in payment of the obligation. The ministry affirmed its readiness to provide necessary and accurate information for Moody’s and other rating agencies to clarify the issue.

Vietnam’s macroeconomic stability

In its October 31 report, Fitch said diverging APAC frontier market sovereign ratings in recent years reflect Vietnam's lengthening record of macroeconomic stability.

The Positive Outlook on Vietnam suggests this divergence could continue, notwithstanding the varying degrees of stabilization seen in the other three sovereigns' credit profiles.

This year, Fitch has affirmed the Vietnam’s sovereign ratings at 'BB'. The revision of the agency’s outlook on Vietnam to Positive in May reflected improving economic management, current account surpluses, falling government debt, high growth and stable inflation.

Vietnam's economic expansion has been driven by strong FDI, mostly into the manufacturing sector, and steady export growth. Exports as a share of Vietnamese GDP rose from 2011-2018. Vietnam's current account surpluses have helped build up external buffers and its external liquidity ratio is well above the 'BB' category median, although funding costs will rise over time as Vietnam moves from concessional to market funding.

GDP growth remained strong in the first nine months of 2019 at 7.0% year-on-year and a similar annual growth rate in the last quarter would maintain Vietnam as one of the fastest-growing economies in Asia-Pacific and in the 'BB' rating category globally.

Vietnam appears to be benefitting from near term trade diversion and production shifts resulting from US-China trade tensions, although large-scale relocation of manufacturing to Vietnam will take time, and the country's high degree of trade openness means it may ultimately feel affects from the trade war, said Fitch Ratings.