This report does not constitute a rating action. Vietnam's LRGs will be pivotal to the country's pro-growth initiatives over the next few years. We believe wealthier local and regional governments will fuel growth engines, driven by higher fiscal outlays. Operating within a unitary system characterized by significant central oversight, city and provincial governments in Vietnam lack full fiscal autonomy. However, the level of decentralization has been steadily increasing in recent years. While Vietnamese LRGs possess independent revenue-generation capacities, they also rely on central government support through balancing and targeted transfers, which serve to facilitate fiscal equalization. S&P Global Ratings views the credit profiles of LRGs as generally similar to one another; this is because of the central government's fiscal rules.
