Moody’s Lowers Vietnam’s Rating to B1 from Ba3

BANGKOK, Dec 15, 2010. Moody’s Investors Service Wednesday downgraded Vietnam’s rating to B1 from Ba3 due to the threat of a balance-of-payments crisis, depreciation pressure on the dong and rising inflation in a further sign of growing doubts over the economy.

The rating agency—which also cited the debt woes at state-run Vietnam Shipbuilding Industry Group, better known as Vinashin—also maintained a negative outlook on the Southeast Asian nation.

“Moody’s considers that short-comings in economic policies have allowed pressures to remain unabated on the balance of payments and are resulting in ongoing macroeconomic instability,” Tom Byrne, a senior vice president in Moody’s Sovereign Risk Group, said in a statement.

Rising inflation, which reached 11% in November—the fastest pace in 20 months, will intensify pressure on the foreign-exchange rate and prompt capital flight. The rising inflationary pressure highlights the government’s weak policies, which are still geared towards growth instead of economic stability.

Moody’s also weighed in on the Vinashin issue, saying that its debt distress indicates the government has a reduced ability or capacity to deliver financial support to the company and perhaps other, large, state-owned enterprises.

Among Vinashin’s debts is a $600 million syndicated loan arranged by Credit Suisse in 2007. On Nov. 29, Vinashin’s management wrote to lenders requesting a deferral if the company is unable to make the first $60 million principal repayment, due Dec. 20.

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