What is Cambodia’s Financial Outkook in 2021?

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The financial outlook for Cambodia is constantly being evaluated due to the impact of the COVID-19 pandemic. We review the latest reports on the Kingdom’s financial situation for 2021.

AMRO

The ASEAN+3 Macroeconomic Research Office (AMRO) reported in May 2021, that the Cambodian economy is expected to return to positive growth in 2021.

The report from AMRO said, “the Cambodian economy is projected to grow by 4 per cent in 2021, led by a robust recovery in manufacturing and supported by continued fiscal stimulus”.

AMRO added on May 6th, 2021, that “the current account deficit narrowed to 11.5 per cent of GDP in 2020 from 15.0 per cent of GDP in 2019, mainly due to the contraction of imports as the economy slowed down. Foreign direct investment (FDI) remained relatively steady, declining slightly by 1.8 per cent in 2020. International reserves increased to USD21.3 billion as of end-December 2020, equivalent to about 11 months of imports of goods and services.”

Moody’s Investors Service

On May 7th, 2021, in the same week as AMRO’s report, Moody’s Investors Service raised concerns for Cambodia being impacted by climate change and said the Kingdom “was among three countries in the Asia-Pacific region most exposed to flood risks arising from climate change.”

The rating agency reported that “EMs [emerging markets] in [Asia-Pacific] stand out for their exposure to flood risk, which is highest in Cambodia, the Philippines and Thailand,” the rating agency said.”

The Khmer Times added that the Cambodian government spent $225 million on combating climate change in 2017.

In April 2021, Moody’s Investors Service 2021 Inside ASEAN report, gave Cambodia a B2 rating.

World Bank – Cambodia Predictions

The World Bank predicted Cambodia would rebound to 4 per cent growth in 2021 with the key drivers being agricultural exports (see the Q1 2021 results here) and the resumption of construction.

The World Bank also predicts Cambodia’s economy is expected to grow by 5.2 per cent in 2022 and 2023.

World Bank Cambodia 2020

Asian Development Bank’s (ADB)

The Asian Development Bank’s (ADB) Cambodian branch expects annual growth of 4 and 5.5 per cent in the SEA country. However, it did suggest that the lengths of the lockdowns seen in many major cities would have an impact on the growth.

ADB’s Asian Development Outlook (ADO) 2021 which was released in late April 2021, also expects economic recoveries in Cambodia’s trading partners to spur some of the growth reports the Khmer Times.

The ADB expects:

  • Cambodian industrial production to increase 7.1 per cent in 2021 and 7 per cent in 2022.
  • The Cambodian agriculture sector is expected to grow by 1.3 per cent in 2021 and 1.2 per cent in 2022.
  • The tourism-related services sector is expected to increase by 3.3 per cent in 2021 and 6.2 per cent in 2022.

VOA Khmer also highlighted the concerns of the financial and banking sectors by the ADP.

“The sector remains well-capitalized, but rising nonperforming loans and loan impairments could put pressure on individual banks and microfinance institutions, threatening the sector’s stability,” suggests the report.

Cambodia Free Trade Agreements

RCEP

The signing of the RCEP (Regional Comprehensive Economic Partnership) mega free-trade deal between its 10 member states and five FTA partners, namely China, Japan, South Korea, Australia and New Zealand could also influence trade and economic growth.

Cambodia is believed to be expediting internal procedures towards the ratification of the deal and other free trade deals in the region.

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