Despite forecasting strong growth for Cambodia this year, the International Monetary Fund warned of risks posed to the country’s economy by the anticipated winding down of the US Federal Reserve's quantitative easing.
Speaking at a conference in Phnom Penh on Friday, Meral Karasulu, deputy division chief at the Asia and Pacific Department of the IMF, said the potential slowdown of “unconventional monetary policy” in the US – effectively injecting money in to the world economy – could have “significant spillovers” across the region.
“Not withstanding robust growth, the economic outlook is subject to downside risks,” said Karasulu, adding that tightening global liquidity could impact foreign investment, tourism and international banking flows.
Nevertheless, the IMF expects Cambodia’s economy to grow by 7 per cent this year, upgraded from the 6.7 per cent it projected in April this year.
The Federal Reserve hinted in June that it would look to taper its policy of cash fuelling this year. And though it is yet to occur, speculation alone has sent ripples throughout the world economy as economists and markets anticipate a decline.
“I think it will somehow impact [Cambodia], but it is very small,” said Mey Kalyan, an adviser to the Supreme National Economic Council.
Kalyan said most of the impacts would be felt in countries with greater short-term investment options.
Given Cambodia’s nascent securities market, most investments are long-term, and therefore the economy was less vulnerable he said.