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Vietnam's Economic Troubles Deepen

Vietnamese women gather to sell vegetables at a street market , in Hanoi. Vietnam's economy has braced market reform, but the recent boom may be facing some hard times (FILE).

Vietnam's economic troubles have deepened as its sovereign credit rating has been lowered by a global rating agency for the second time this month.

Standard and Poor's Ratings Services announced Thursday that it was lowering Vietnam's long-term rating by one notch to BB minus, putting it on the same level with Bangladesh and Mongolia.

Moody's Investors Service took similar action eight days ago, citing the risk of a balance-of-payments crisis and problems at the state-owned ship-building company Vinashin.

The lower rating makes it more difficult and more expensive for Vietnam to borrow money abroad.

Standard and Poor's said it was acting because Vietnam's banking system has become more susceptible "to a financial or economic shock." It said the country's long-term outlook is negative, meaning its rating could be lowered further in the future.

Moody's said last week that Vietnam's problems result from "shortcomings in economic policies" that are "resulting in ongoing macroeconomic instability."

It said the government has been too slow to tighten its monetary policy after having successfully stimulated its economy during the global economic crisis.

Moody's said Vietnam's debt problems reduce its ability to support state-owned enterprises like Vinashin, which came to the brink of bankruptcy earlier this year with $4.4 billion in debt. The company was unable to make a $600 million payment due on Monday and is asking its creditors to reschedule the debt.

Vinashin was once promoted as a prime example of Vietnam's economic liberalization, enjoying rapid growth and expanding into areas ranging from animal feed production to tourist resorts.

Its chairman was suspended in July and later arrested on charges of having ignored state regulations on economic management. Six other former top executives of the company also face charges.

Some information for this report was provided by AFP and Reuters.