S&P says Indonesia, Vietnam, Sri Lanka ratings at risk

MADRID, May 5 (Reuters) - Indonesia, Sri Lanka and Vietnam could see their credit ratings hit if their governments fail to curb inflation and government expenditure, Standard & Poor's (S&P) said on Monday.

The ratings agency said rising oil prices were saddling Indonesia with an ever increasing bill for fuel subsidies and threatening its macroeconomic stability and "BB-" ratings.

Turning to Sri Lanka, the ratings agency said persistently high inflation in the island nation -- currently at more than 20 percent year-on-year -- required more forceful policy action to restore price stability.

"The lack of progress towards fiscal consolidation indicates that the government continues to prioritise growth and uses high levels of government expenditure to achieve it," S&P said.

Any further signs of fiscal slippage would lead to a downgrade of Sri Lanka's "B+" rating, it warned.

S&P also said Vietnam's stable "BB" rating outlook could be changed if no adequate government response was taken to deal with rising inflation and an overheating economy.

"Rapidly rising food prices are becoming a top concern for many governments, as further erosion of the affordability of staple foods, particularly in low per capita income economies, could lead to social tension and political instability," S&P said. (Reporting by Sebastian Tong and Yoo Choonsik)