Frequently asked questions on credit outlook 2025
On 20 February 2025, we launched our new webinar series, “Vietnam Bonds & Credit Forum” jointly hosted by VIS Rating and Moody’s. Our webinar series will feature industry experts from Vietnam and the broader APAC region and focus on hot topics relevant to bond and credit market participants.
In our first webinar focused on the credit outlook for 2025, we invited Mr. Christian de Guzman, Senior Vice President - Manager, Sovereign and Sub-Sovereign Risk Group, Moody’s Rating and Dr. Nguyen Tu Anh, Department Director of the Central Strategic Policy Department, Advisory body of the Communist Party of Vietnam, to discuss various hot topics: Moody’s insights on the global macroeconomic outlook for 2025, key risks stemming from policy changes by the new US administration, and how government policies will impact the credit outlook across key industries. This report summarizes the key takeaways from the webinar event.
Public spending, FDI, and exports are key to maintaining Vietnam’s robust economic outlook and momentum to achieve its 2025 GDP growth target of 7.0-7.5%. More investments in public infrastructure will boost business activity in the construction, materials, and transportation sectors. We expect retail sales to improve 10-12% year-on-year (yoy) in 2025 as public wages increase, business and employment incomes stabilize, and tourism continues to grow.
Credit conditions for Vietnam in 2025 will stabilize after improving substantially over the past year. Supportive policies aimed to achieve Vietnam’s 2021-2025 socio-economic development plan objectives and targets will drive improving domestic business conditions. Given various government policies implemented to support economic growth and resolve industry bottlenecks, credit fundamentals for Vietnam banks will improve modestly in 2025, led by State-owned banks (SOBs) and several large banks.
In addition, the credit fundamentals for Vietnam real estate developers in 2025 will continue on the recovery path from the downturn in recent years as market conditions turn more favorable to facilitate new project development and sales. Corporate bond default rates will continue to decline as corporate cash flows improve to support debt servicing, and stronger market confidence provides issuers with greater ease to refinance.
Weak cash flow is the key credit weakness of Vietnam developers, as around 70% of our covered developers have weak operating cash flow to cover debt repayments. Meanwhile, governance risks, uneven recovery in the real estate market and volatile external conditions remain our key credit concerns for Vietnam banks.
The corporate bond market in 2024 is getting back on track with a marked reduction in new defaults. Recovery in market sentiment is reflected by the strong increase in total new issuance value and improving liquidity in the secondary market. We expect the amended Securities Law, effective from January 1, 2025, with stricter regulatory requirements for new bond issuances and investments, and promoting the use of credit ratings to inform investment risks, will help deepen the corporate bond market in the new development phase.
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