DO NOT KID YOURSELF. VIETNAM continues to be racked by inflation.
NOW IS NOT THE TIME TO INVEST IN VIET NAM.
NEGATIVE CREDIT RATINGS ARE SERIOUS.
Mcgraw Hill Companies Inc - Credit Ratings On Vietnam Affirmed; Negative Outlook Reflects Risk On Financial Stability
21 May 2009
Market News Publishing
THE MCGRAW-HILL COMPANIES ("MHP-BHDNPX") - Credit Ratings On Vietnam Affirmed; Negative Outlook Reflects - Risk On Financial Stability
-- Ratings on Vietnam reflect the country's low-income economy, developing
financial system, and evolving policy framework.
-- Healthy growth prospects, reinforced by the government's persistent
efforts in economic restructuring, and a modest level of external
indebtedness partly offset these weaknesses.
-- We affirmed the 'BB/B' foreign currency and 'BB+/B' local currency
ratings on Vietnam.
-- The negative outlook on the ratings reflects the risks to financial
stability as Vietnam banks face an economic slowdown with weakened balance
sheets.
SINGAPORE, May 21, 2009--Standard & Poor's Ratings Services said to-day it affirmed its 'BB/B' foreign currency and 'BB+/B' local currency sovereign credit ratings on Vietnam. The outlook on the long-term credit ratings remains negative. "The credit ratings on Vietnam reflect the country's low-income economy, developing financial system, and evolving policy framework," said Standard & Poor's credit analyst Kim Eng Tan. "These weaknesses increase the vulnerability of the economy to severe shocks that could significantly increase the public financial burden."
Healthy economic growth prospects, reinforced by the government's persistent efforts in economic restructuring, partly offset these weaknesses. A modest level of external indebtedness also supports the government's credit quality.
Developments since 2007 highlight the risks associated with Vietnam's credit weaknesses. Strong foreign capital inflow in 2007 and early 2008 was met with inadequate policy responses, which caused credit growth to accelerate from already high levels. By early 2008, this combination had led to clear signs of macroeconomic imbalances as inflation and trade deficit rose steeply.
"A strong policy response from the government prevented imbalances from developing into instability," Mr. Tan said. By April 2009, consumer price inflation has receded to below 10% and the trade account was in surplus for the first four months of this year.
The politically difficult steps taken to achieve this, as well as the continuing economic reforms implemented over this period, likely reassured investors, he added.
"Foreign direct investment remained very strong in 2008 and we expect it to contribute to maintaining Vietnam's trend annual economic growth at about 7%. We forecast this year's growth to be lower at 4% because of the global slowdown," Mr. Tan said.
The volatility of recent years, however, has weakened the banking sector's balance sheet. Nonperforming loans are expected to rise over the next one to two years, particularly at the newer and smaller banks that had seen the fastest lending growth. If the economic downturn is prolonged, financial pressure will mount to exacerbate asset quality deterioration.
The government may have to support the banks to preserve financial stability. This would damage the sovereign financial position by raising net general government debt significantly above the current level of close to 29% of GDP, Mr. Tan said.
RELATED RESEARCH
Full analysis on Vietnam, published Dec. 30, 2008, on RatingsDirect.
Vietnam inflation slows to 5.58 pct in May: govt
23 May 2009
Agence France Presse
Vietnam's inflation rate slowed to 5.58 percent in May, down sharply from last year's record high, the General Statistics Office said.
In a report late Friday, the GSO said food prices rose 6.50 percent year-on-year, beverages and tobacco were up 9.71 percent, while housing and construction material costs rose 0.70 percent.
Consumer prices overall were 0.44 percent higher than in April, and increased 2.12 percent from December, GSO data showed.
Vietnam's consumer prices rose by 9.23 percent year-on-year in April.
After more than a decade of rapid economic growth, Vietnam struggled to contain double-digit inflation which hit a record 28.3 percent last August and was 23 percent for the full-year 2008, sharply up from eight percent in 2007.
But the country, a major exporter of manufactured goods including clothing and footwear, as well as seafood, rice, coffee and other commodities, has since been hit by downturns in the United States, Europe and other markets.
Faced with the economic slowdown, the government on Tuesday asked the National Assembly to agree to reduce this year's economic growth target to around five percent from the previous goal of 6.5 percent.
A lower target is required "to create momentum for better and more sustainable development in the following years," Deputy Prime Minister Nguyen Sinh Hung said at the opening of a twice-yearly legislative session by the communist-dominated assembly.
The World Bank has estimated 5.5 percent economic growth for Vietnam in 2009 and the International Monetary Fund predicts 3.5 percent growth.
Vietnam: Inflation increases in leading cities
25 May 2009
Thai News Service
Although Hanoi's consumer price index (CPI) saw an increase in May over last month, it was still lower than the country's economic hub of Ho Chi Minh City, according to the Government statistics agencies.
According to the Hanoi Statistics Department, the capital's May CPI rose 0.24 per cent over April and the index surged 12.91 per cent over the same period last year.
Prices of eight out of the 10 commodities and services used to calculate the CPI rose in May. Transportation, post and communications had the highest increase rate of 2.31 per cent due to several petrol price hikes recently.
In May, only the price of food and foodstuff decreased 0.25 per cent. Education costs in the capital remained unchanged. Meanwhile, May's CPI in Ho Chi Minh City rose 0.58 per cent over April, a 2.47 per cent rise compared to the first month of the year, according to the city's Statistics Department.
The prices of nearly all of the 10 commodities and services used to calculate the CPI in Ho Chi Minh City increased in May.
As in Hanoi, transportation, post and telecommunications costs saw the highest increases at 2.08 per cent.
Housing, electricity, fresh water, fuel and construction materials rose 1.37 per cent and household appliances, 1.17 per cent.
Prices increased slightly, by 0.34 per cent, for food and foodstuff, and 0.48 per cent for beverages and cigarettes.
The department said price hikes were due to higher consumer demand during a two-day holiday earlier this month.
The only Ho Chi Minh City price drop occurred in cultural activities, entertainment and tourism, which fell 0.14 per cent. Prices for other goods and services remained stable.
In May the price of gold rose 0.2 per cent while the price of the US dollar against the dong jumped 1.96 per cent, compared to April.
The price of many goods, especially imports and goods produced using imported materials, are expected to increase next month, according to manufacturers and traders.
Manufacturers said they planned to raise their prices due to a price hike in input materials, transport freight and a surge in price of the US dollar against the dong. The price of the dollar against the dong in April increased 1.25 per cent.
Industry insiders said the price of materials used for animal feed, including oil-cake, corn and broken rice, had increased roughly 50 per cent over April. Oil-cake surged from US$230 to $461-495 per tonne, and corn rose from $120 to $198 per tonne.
Costs of chemicals and input materials used in the packaging, plastic and cosmetic industries are also up 10-15 per cent over last month.
Deputy director of Sai Gon Cosmetics Joint Stock Company, Nguyen Thi Thanh Thao, said the price of input materials for many industries had surged 20-30 per cent over the same period last year, so a 5-10 per cent price hike for finished goods was not enough to offset the additional costs.
Supermarkets said they would have to raise prices starting next month because suppliers were hiking their prices.
Director of the Hanoi Supermarket, Nguyen Thi Thanh Hai, said that more than 100 suppliers had asked her supermarket to raise prices.
Sai Gon Co-op and Hanoi Supermarket said they would have to lift prices of consumer goods and food by 7-10 per cent next month when current stock is used. - VNS
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