The outlook on the long-term rating for Vietnam is stable, reflecting an expectation that the country’s economy will accelerate over the next 12 months as global demand picks up and the country gradually resolves its domestic challenges, S&P Global Ratings said in its report issued on Thursday.
The international credit rating agency remarked that its sovereign ratings on Vietnam reflect the country’s strong economic growth outlook, moderate government debt levels, and generally sound external position.
Following a slowdown in 2023, Vietnam’s economy is accelerating and will pick up to 5.8 percent this year compared to around 5 percent in 2023, thanks to expected stronger global demand conditions.
Over the next three to four years, Vietnam’s real GDP growth rate is expected to return to its long-term trend of 6.5 – 7percent, according to the report.
Vietnam’s GDP per capita is expected to reach about US$4,500 at the end of 2024, the agency stated.
This projected figure is higher than the country’s 2023 GDP per capita of $4,284.5 as recorded by the General Office of Statistics of Vietnam.
The Southeast Asian nation’s export-led economy relies on strong external demand that is firming, the rating agency said, and anticipated that the upcycle in the semiconductor industry will also play a role in propelling Vietnam’s growth this year, as exports from the industry increase.
Trade performance has improved remarkably so far this year, following a higher current account surplus in 2023, the report said, and predicted that both exports and imports will likely return to healthy growth rates in 2024.
In the rating agency’s view, “the current account surplus will remain elevated, at about 5.5 percent of GDP this year, before moderating toward its long-term trend from 2025 onward.”
Since multinational 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.
Vietnam’s competitive unit labor costs, improved educational standards, and constructive demographics have contributed to continued growth in FDI and goods exports.
The country has emerged as a top destination for diversification for global firms operating in the region, and has also actively enhanced market access via bilateral and multilateral free trade initiatives.
On the services side, cross-border travel is recovering, including a surge in Chinese tourists, the agency said, citing the data from Vietnam’s National Authority of Tourism showing that total tourist arrivals into Vietnam in the first five months of 2024 soared by 165 percent year on year.
The agency also expected public investment to gradually accelerate over the coming years in Vietnam, mainly from the state budget, and commented that “delays in the execution of capital projects have hampered Vietnam’s public spending in the past and reduced support for growth.”
