Via IMF (Den Internationale Valutafond)

IMF Staff Completes 2019 Article IV Mission to Cambodia

October 11, 2019

End-of-Mission press releases include statements of IMF staff teams that convey preliminary findings after a visit to a country. The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. Based on the preliminary findings of this mission, staff will prepare a report that, subject to management approval, will be presented to the IMF’s Executive Board for discussion and decision.

  • Cambodia’s economic activity has been strong, and growth is expected to remain around 7 percent this year.
  • Further measures are needed to contain high credit growth and address elevated financial sector vulnerabilities, including through targeted measures in the real estate sector.
  • Uncertainties, including from trade tensions and potential suspension of preferential market access, highlight the importance of maintaining macroeconomic stability, while meeting still large development needs, and accelerating implementation of structural reforms to strengthen competitiveness and governance.

An International Monetary Fund (IMF) team led by Mr. Jarkko Turunen,
visited Phnom Penh from September 30 to October 11, 2019, to conduct
discussions on the 2019 Article IV consultation. [1] At the end of the
visit, Mr. Turunen issued the following statement:

“Stable macroeconomic environment, strong growth performance and ongoing
structural reforms have contributed to significant progress towards
Sustainable Development Goals (SDGs). At the same time, Cambodia faces
uncertainties including from trade tensions and potential suspension of
preferential market access under the EBA scheme.

“Economic activity remains strong with real GDP growth expected at around 7
percent this year, owing to continued export growth and strong construction
activity, while inflation remains stable at around 2.5 percent.
Deterioration of external conditions is expected to lead to a slowdown in
growth to below 7 percent in 2020. In the medium term, growth is expected
to moderate further as the real-estate and credit cycles mature. Export
growth is also expected to moderate, leading to a widening of the current
account deficit to about 13.5 percent of GDP in 2019. Thanks to large
capital inflows, primarily through Foreign Direct Investment (FDI), the
foreign reserves are nevertheless expected to continue to grow.

“Cambodia’s economic outlook is positive, although there are 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 near-term economic activity. Other downside risks
include: (i) spillovers from rise in global trade protectionism, which
could hamper exports and dent investor’s confidence; (ii) weaker than
expected global growth, including slower growth in China; and (iii) risks
stemming from elevated financial sector vulnerabilities.

“Robust revenue performance continues, and, thanks to strong administrative
efforts, tax revenues reached close to 19 percent of GDP in 2018. As a
result, the 2018 fiscal balance (following the Government Finance
Statistics Manual 2014 format) shows a surplus close to 1 percent of GDP.
The fiscal position is projected to remain in surplus also this year.

“The authorities are proactively addressing risks through a structural
reform plan aimed at improving competitiveness and diversification. The
preliminary 2020 budget envisages continued revenue growth and, to mitigate
near-term negative impact on growth from potential EBA suspension, an
increase in government spending to support job creation, human capital
development and a scale-up in infrastructure investment. As a contingency,
should EBA suspension materialize, authorities’ plans for additional fiscal
spending together with accelerated implementation of structural reforms go
in the right direction and can help dampen near-term negative impact.

“Looking ahead, strong implementation of the authorities’ new Revenue
Mobilization Strategy (2019-23) should help sustain revenue growth through
tax policy and revenue administration reforms. Additional expenditures
should continue to be oriented towards priority infrastructure investment,
as well as health and education spending, while ensuring gains in spending
efficiency. Prudent fiscal stance needs to be supported by restraining
non-development current spending.

“Public debt remains low at 28.6 percent of GDP in 2018 and Cambodia is
expected to remain at low risk of debt stress despite an increase in both
debt disbursements and Public-Private Partnerships (PPPs) to finance needed
infrastructure investment.

“The authorities continue to implement macroprudential measures and are
taking welcome steps to promote the effectiveness and transparency of
macroprudential policy decisions. The first Financial Stability Review was
launched in April 2019. At the same time, private sector credit,
increasingly concentrated in the real-estate and construction sectors, has
accelerated and is expected to grow around 28 percent in 2019. Lending by
real-estate developers remains largely unmonitored and unregulated and
official data on real-estate prices are not yet available.

“Further policy efforts are needed to address elevated financial sector
vulnerabilities. Priority measures include implementation of targeted
policies, such as higher risk weights and provisioning requirements for
real estate lending as well as introducing a prudent aggregate
loan-to-value limit, to address risks associated with the real-estate
sector. To moderate credit growth, consideration should be given to
additional macroprudential measures such as gradually raising reserve
requirements on foreign currency liabilities. Promptly addressing
shortcomings in the AML/CFT regime would reduce financial risks, while
further financial market development and increase in local currency use
would help strengthen resilience over the medium term.

“To solidify the already substantial progress towards SDGs, policies should
be geared towards addressing spending needs to reach SDG targets in health,
education and infrastructure by 2030. Accelerated implementation of
structural reforms is needed to reduce structural constraints to growth,
address governance and corruption weaknesses and promote sustainable
development. While significant progress has been made, additional efforts
are needed to address data gaps, and improve data quality and transparency.

“The IMF stands ready to support the authorities’ reform efforts through
policy advice and capacity development activities.”

The IMF team held constructive and candid discussions with senior officials
of the Royal Government of Cambodia, National Bank of Cambodia, and other
public agencies, as well as a wide range of stakeholders, including
representatives of the business and banking sectors, and development
partners. The team wishes to express its deep appreciation to the
authorities and other stakeholders for frank and constructive discussions
as well as their warm hospitality.

1/ Under the Article IV consultation, IMF staff undertakes annual
surveillance and analysis of economic developments and policies of member
countries for discussion by the Executive Board. The last Article IV
consultation discussion with Cambodia took place in December 2018.

IMF Communications Department

PRESS OFFICER: Keiko Utsunomiya

Phone: +1 202 623-7100Email:


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