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Vietnam's large-scale infrastructure investments, valued at roughly USD 200 billion, are projected to raise the country's fiscal deficit to 4.2% of GDP this year and increase public debt from 33% of GDP. Moody's Ratings expects the debt to remain lower than regional peers. Banking reforms under To Lam aim to reduce exposure to real estate, where loan growth had surged to 42% by late September. Vietnamese banks maintain low capital buffers with a Tier 1 ratio of 9%, prompting Moody's to advise state-owned banks such as BIDV and VietinBank to strengthen their capitalization.
Vietnam's ambitious investment in large-scale infrastructure is expected to increase its fiscal deficit and public debt, according to Moody's Ratings. The country has launched hundreds of infrastructure projects last year alone, with an estimated total value of around USD 200 billion, as part of efforts to diversify its export-driven economy and sustain long-term growth. Advertisement
The government is aiming for a fiscal deficit of 4.2% of GDP this year, up from 3.8% in 2025. This expansion will push the debt burden, which stood at roughly 33% of GDP last year, higher. Moody's projects that despite the increase, Vietnam's debt will remain lower than regional peers, around 40% of GDP by the end of the decade.
Moody's highlighted that a broad reform agenda under top leader To Lam is expected to strengthen the banking sector and reduce its exposure to the real estate market. Loan growth to real estate surged to 42% by the end of September compared with the previous year, significantly higher than the 27% average recorded between 2022 and 2024. However, Moody's expects this exposure to stabilize this year.
The agency also noted that Vietnamese banks currently hold relatively low capital buffers, with a Tier 1 capital ratio of 9%, nearly half the Southeast Asian average. It anticipates the gap to narrow over the coming years due to stricter capital requirements. Moody's urged some large state-owned banks, including BIDV and VietinBank, to actively strengthen their capital buffers, pointing out that their capitalization remains modest compared with most private commercial banks.
Source Reuters
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