In the shadow of the Covid-19 pandemic, a staggering 81% of Cambodian establishments, spanning sectors from manufacturing and retail to hospitality and food services, have found themselves grappling with substantial economic challenges. 

According to data recently released from the 2022 Economic Census, among the businesses affected by the pandemic, 587,793 (34.8%) logged lower revenues that year, 433,703 (26.6%) recorded higher expenditures, 212,760 (12.6%) noted declines in market demand, and 153,878 (9.1%) reported a lack of working capital.

“The pandemic crisis has had significant negative impacts on business”, the census stated.

The government implemented the “Strategic Framework and Programmes for Economic Recovery in the Context of Living with Covid-19 in a New Normal 2021-23” initiative in December 2022, aimed at fostering resilient socio-economic growth in the medium and long term.

During the launch, Minister of Economy and Finance Aun Pornmoniroth lauded the document as an important roadmap for the immediate, medium and long-term implementation of government strategies and specific actions.

He said it aims to restore and bolster the country’s economic growth back to its potential rate and strengthen resilience for sustainable and inclusive socio-economic development in the long run. 

“In the last two years of Covid-19, we’ve all clearly been able to notice the negative consequences on the socio-economic situation in Cambodia stemming from the crisis. In addition to threatening to take the lives of the people, the crisis has exposed some of the fragile points of Cambodia’s economic base that are vulnerable to external factors,” he said. 

Anthony Galliano, group CEO of Cambodian Investment Management Holding, told The Post on January 3 that the general sentiment from the business community is that 2023 was a challenging year. 

He noted that although most institutions project a 5% growth rate, a significant number of industries feel they haven’t participated in the growth – particularly in the tourism, real estate, construction, hospitality and export sectors. 

While there was a welcomed short-term spike in 2022 in certain sectors, he said it was far from universal and many industries commenced a steeper decline. 

“Brand-name hotels in Phnom Penh are experiencing a 30-40% occupancy rate, even during the high season, and Siem Reap is much worse off,” he stated.

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He explained that after decades of strength and stability in real estate prices, there has been a recent drop, estimated to be between 20-40%, depending on the category. 

According to Galliano, construction is under stress with many projects stalled, thus driving non-performing loan (NPL) rates higher. Exports are down from 2022 and are expected to be lower than in 2021. 

He believes that while 2023 felt gloomy in many sectors despite a forecasted growth of 5%, 2024 is expected to be a year of strong recovery with widespread optimism. 

“This is driven by a new, focused and relentless government that is working tirelessly to revive the economy in both the short and long term and has introduced clear and coherent economic development policies. SME Bank is a very successful programme that has supported industries in post-pandemic distress and has also targeted the manufacturing and processing sectors in addition to hospitality,” he said in reference to the state-run Small and Medium Enterprise Bank of Cambodia. 

“On the back of its achievements, and the superb support and lifeline it has provided, an expansion in the programme would be sensible given the substantial demand for credit in the small and medium-sized enterprise space and lack of lenders currently able to supply,” he added.

Officially licensed as a commercial bank by the National Bank of Cambodia (NBC) in February 2020, SME Bank aims to provide “affordable, sustainable financing” to domestic SMEs to promote economic diversification and exports.

Minister of Social Affairs, Veterans and Youth Rehabilitation Chea Somethy recently said that the government is prepared to integrate the programme with others, forming a comprehensive social protection network to respond to emergencies. 

He noted that the government had allocated over $1.305 billion for five social protection initiatives and, during the Covid-19 pandemic, expended $1.213 billion to support 698,585 families as of October 24, 2023. 

According to the minister, from December 2022 to last July, $44 million was disbursed to assist 495,307 households at risk of inflationary pressures. 

He said the government released $250 million for direct loans from SME Bank and the Agricultural and Rural Development Bank of Cambodia (ARDB) – another state-owned lender – in 2023 for key priority sectors like agriculture and ecotourism. 

Over the past three years, SME Bank has extended loans to approximately 3,200 enterprises, amounting to roughly $490 million. 

According to the finance ministry, the government established the Credit Guarantee Corporation of Cambodia Plc (CGCC) on September 1, 2020, and its $200 million Business Recovery Guarantee Scheme (BRGS) was launched on March 29, 2021. 

As of November 30, 2023, the corporation had issued a total of 1,880 letters of guarantee (LG) for loans worth $159.7 million to support micro, small and medium enterprises (MSMEs) affected by Covid-19 in recent years, as per the ministry.