Cambodia Maintains Sovereign Credit Rating From Moody’s Agency

Healthy growth prospects and a stable external payments position has helped Cambodia maintain its B2 sovereign rating from global credit rating agency Moody’s Investors Services, although warnings were given regarding the Kingdom’s rapid rise in private-sector credit, high level of dollarisation and narrow economic base vulnerable to external shocks. 

Garment exports, tourism and considerable foreign direct investment (FDI) inflows were the chiefs factors supporting Cambodia’s robust growth, and hence its credit strengths, according to the Moody’s report, while the country’s “very low” score on government effectiveness, rule of law and the ability to combat widespread corruption were what worked against it. ACLEDA Bank President and group managing director In Channy said the government should be striving to obtain a rating of Baa3 or higher to increase investor confidence and decrease lending rates linked to Cambodia’s international risk profile. “If the country gets a lower rate, the borrowing interest rate from international financial institutions tends to be higher,” he said. 

However, Business Research Institute for Cambodia CEO Hiroshi Suzuki said the scale of the economy and size of the national income were the major factors affecting Moody’s rating, adding that institutional strength was not something the Kingdom could change easily. “In order to attract FDI to Cambodia, this kind of rating is indispensable,” he said. “Although the rating of B2 is not such a good rating, this kind of analysis could help investors make decisions.” 

For more on this story, click here.