U.S. Credit Rating Agency Moody’s: Cambodian Credit Conditions Reflect a Solid Growth Prospect and Marks the Rise of its Investment Value
According to Moody’s, Cambodia has strong fiscal butter capacity to cope with the trade and economic growth interruption caused by the COVID-19. (Photo from Cambodia-China Times)
(Phnom Penh) U.S. Credit Rating Agency Moody’s predicts that Cambodia will show a V-shaped economic growth pattern in the next two years, meaning that the GDP growth this year is estimated to shrink to 0.3% and rebound to about 6% next year.
According to Moody’s, Cambodia has strong fiscal butter capacity to cope with the trade and economic growth interruption caused by the COVID-19.
In a recent report, Moody’s pointed out that the economic slow-down in China, EU and the United States would dim the growth prospect of Cambodia this year, and the Cambodian GDP growth this year is estimated to shrink to 0.3% and rebound to about 6% next year.
Moody’s revealed that the latest credit conditions of Cambodia reflect a solid growth prospect and a moderate debt burden of the country.
Moody’s warned that the outbreak of the pandemic would affect Cambodia’s investment and tourism industry, especially in consideration of its relationship with China.
According to Anushka Shah, senior analyst and vice president of Moody’s, China is Cambodia’s largest foreign direct investor and largest tourist generating country of Cambodia. China takes up 43% of Cambodia’s direct foreign investment and Chinese tourists accounted for 36% of Cambodian inbound tourist arrivals in 2019.
He pointed out that the economic recession of Europe and the United States would result in a decline in the demand for Cambodian commodities, which would constitute risks for economic and financial stability.
He believed that the surplus of Cambodian’s government current account, and mostly concessional and long-term government debts would help ease the temporary interruption in the economic growth. Factors like a high degree of dollarization of the banking system weakening the strong monetary policy and rapid growth of domestic credit (especially over-concentration in building and real estate sectors) would threaten the country’s economic stability.
At the end of April this year, the Asian Development Bank (ADB) pointed out in an outlook report that Cambodian’s economic growth would be reduced to 2.3% after 20 years of strong performance due to the hit of the pandemic.
Sunniya Durrani-Jama, a representative of ADB in Cambodia said in a statement on April 3, “Under the premise of pandemic termination and restoration of economic activities, Cambodia’s economic growth is estimated to rebound to 5.7% in 2021.”
“In face with the unprecedented challenges brought by the pandemic, the Cambodian government has taken the right countermeasures to cope with the crisis, including providing pay allowance for clothing factory workers and tax holiday and ease of credit for enterprises. The government has also created fiscal space to reduce the economic impact of this crisis on the people, the most vulnerable groups in particular, as much as possible.”
The International Monetary Fund (IMF) predicted that the pandemic would result in the global economic downturn and Cambodia’s GDP growth this year would drop to minus 1.5%.