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MEF sounds warning bell over credit growth risk

The Ministry of Economy and Finance has raised concerns about the rapid growth of credit and real estate sectors, which it says could pose risks to Cambodia’s economic growth, while emphasising that policy measures were being taken to mitigate these risks.

Vongey Vissoth, secretary of state at the Ministry of Economy and Finance, said yesterday during a public forum organised by the ministry that while the country was in a better fiscal position than a few years ago, there were structural weaknesses that needed to be addressed.

“Our message is that we are moving ahead, but in front of us there is some turbulence,” he said. “We must be ready and prepared to respond.”

Cambodia’s 6.9 per cent growth in 2015 and projected growth of 7 per cent this year could be derailed by risks emerging from the banking and financial sector, and its links to credit growth in the real estate sector, he added.

“Our banks play an important role in pushing economic growth and to make structural changes,” Vissoth said. “It has also created risk because the size of loans is huge and we are concerned about these loans.”

He said Cambodia’s much-lauded microfinance (MFI) sector had seen tremendous growth and profits, but high interest rates and the agricultural fallout from drought conditions across the country could put the sector at risk.

“The MFI sector is not small – the size and scope is not small anymore,” he added.

Officials at the forum also highlighted the salient features of the government’s budget performance last year, prospects for this year’s spending, as well as fiscal management measures, which they said have kept the country’s expenditure and loan repayment commitments in check.

Mey Kalyan, senior adviser to the Supreme National Economic Council, said the ministry has been working with stakeholders, like the World Bank and International Monetary Fund, on public financial management measures, which was now yielding results.

“The situation is more manageable now and better than some other ASEAN countries,” he said.

He said fiscal technicalities, like inflation, current account deficit, and revenue and spending management, have had an effect only because of increased capacity at the ministry.

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