IMF Executive Board Concludes 2019 Article IV Consultation with Cambodia
December 26, 2019
Growth accelerated to 7½ percent in 2018. Economic activity remains robust
this year with real GDP growth expected at around 7 percent, owing to
continued export growth and strong construction activity, while inflation
remains stable at around 2.5 percent.
The current account deficit widened to about 12 percent of GDP in 2018 and
is expected to widen further this year. Robust Foreign Direct Investment
inflows, as well as an increase in other short-term inflows, have
nevertheless contributed to an accumulation of gross international reserves
to about 7 months of prospective imports in August 2019.
Financial conditions have been accommodative. Private sector credit,
increasingly concentrated in the real-estate and construction sectors, has
accelerated and is expected to grow around 28 percent in 2019.
Robust revenue performance continues, and, thanks to strong administrative
efforts, the 2018 fiscal balance (following the Government Finance
Statistics Manual 2014 format) shows a surplus close to 1 percent of GDP in
2018. The fiscal position is projected to remain in surplus also this year.
Deterioration of external conditions is expected to lead to a slowdown in
growth to below 7 percent in 2020. Cambodia’s economic outlook is subject
to significant downside risks. The on-going Everything but Arms (EBA)
review by the EU—Cambodia’s primary export partner—could lead to a
suspension of preferential trade access later next year, which could have a
large negative impact on economic activity.
Executive Board Assessment
Executive Directors commended Cambodia’s strong and sustained economic
growth over the past years and significant progress in reducing poverty.
Directors noted, however, that near-term economic activity is likely to
moderate and the outlook is subject to notable downside risks, including
from a potential suspension of trade preferences under the EU’s Everything
But Arms scheme and weaker-than-expected global growth. Directors
encouraged the authorities to implement policies to safeguard fiscal
sustainability, address macro-financial risks, and support continued
progress toward the Sustainable Development Goals (SDGs).
Directors commended the authorities for strong revenue performance, which
has helped keep public debt low and allowed government deposits to reach
high levels. They welcomed the authorities’ plans to scale up priority
social and infrastructure spending given the large needs to meet the SDG
targets by 2030. Directors stressed, however, the need to support fiscal
sustainability by restraining non-development current spending, including
the wage bill, and by continuing to strengthen revenue mobilization and
enhance tax efficiency. Directors considered that fiscal governance should
be further improved to raise revenue collection, manage fiscal risks from
public-private partnerships, increase spending efficiency, including by
strengthening public investment management, and reduce opportunities for
corruption. Publishing the medium-term fiscal framework and implementing a
debt-based fiscal anchor would help safeguard fiscal sustainability over
the medium term.
Directors noted positively that the Cambodian financial system is
profitable, has sizeable capital buffers, and has low nonperforming loan
ratios. They noted, however, that credit has accelerated and is
increasingly concentrated in the real estate sector and consumer lending.
They called for prompt actions to moderate credit growth, including through
additional macroprudential measures and a broad-based policy response to
address risks stemming from the real estate sector. Directors considered
that lower credit growth, coupled with prudent fiscal policy and structural
reforms, would also help reduce external imbalances. Directors called for
further progress to strengthen financial sector oversight, including
AML/CFT supervision. They noted that promoting further financial market
development and local currency use would allow the central bank to move
toward a more robust and flexible monetary policy framework.
Directors commended Cambodia’s significant progress toward the SDGs owing
to strong economic growth and structural reforms. They welcomed the
authorities’ structural reform plan aimed at improving competitiveness and
diversification, including through trade facilitation, lowering the cost of
doing business, and improving governance. They emphasized that meeting the
SDG targets by 2030 will require sustained policy efforts, particularly in
improving education and health outcomes and investing in infrastructure. To
improve economic resilience, structural constraints should be addressed,
including through diversifying growth drivers, ensuring a reliable energy
supply, strengthening anti-corruption efforts, and enhancing the regulatory
environment. Directors also underscored the importance of renewed efforts
to address data gaps and improve data quality.
Cambodia: Selected Economic Indicators, 2015–20
Under Article IV of the IMF’s Articles of Agreement, the IMF holds
bilateral discussions with members, usually every year. A staff
team visits the country, collects economic and financial
information, and discusses with officials the country’s economic
developments and policies. On return to headquarters, the staff
prepares a report, which forms the basis for discussion by the
At the conclusion of the discussion, the Managing Director, as
Chairman of the Board, summarizes the views of Executive Directors,
and this summary is transmitted to the country’s authorities. An
explanation of any qualifiers used in summings up can be found
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