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Moody's lowers Vietnamese credit rating

Moody’s lowers Vietnamese credit rating

(3 October 2012 – Vietnam) Moody’s Investor Service downgraded Vietnam’s credit rating as concerns grow over its weakening banks. The downgrade to B2 from B1 for government bonds issued in local or foreign currency, which pushes these bonds further into junk territory, means Vietnam faces higher borrowing costs if it sells new bonds. It could also deter foreign investment.

The ratings agency also lowered its view on the eight Vietnamese banks it assesses, reporting there was a greater likelihood they will need government support to survive amid much poorer asset quality and pressures on their profitability.

Moody's highlighted the vulnerability of Vietnam's banks, which are facing a growing bad-debt problem after years of unrestrained credit growth and subsequent policy tightening.

It noted that banks' weakness had curbed their ability to lend to the economy. The government, if saddled with the cost of bank bailouts, might not be able to provide sufficient fiscal stimulus if global growth slows further.
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