Logo of Phnom Penh Post newspaper Phnom Penh Post - S&P pegs Kingdom’s 2022 GDP growth at 6.3%

S&P pegs Kingdom’s 2022 GDP growth at 6.3%

Content image - Phnom Penh Post
An aerial view of central Phnom Penh showing numerous high-rise buildings. YOUSOS APDOULRASHIM

S&P pegs Kingdom’s 2022 GDP growth at 6.3%

Global rating agency Standard & Poor (S&P) forecasts Cambodia’s gross domestic product (GDP) to expand to 6.3 per cent this year, higher than projections made by the World Bank, International Monetary Fund and Asian Development Bank.

The international institutions predicted GDP growth to be around 4.5 per cent to six per cent, due to rising global prices of oil and other commodities.

S&P’s report Global Banking Outlook Midyear 2022 stated that economic recovery is underway in Cambodia.

The market consensus is that its economy rebounded to three per cent in 2021, after contracting by 3.1 per cent in 2020.

“The country’s vaccination programme was a notable success, which facilitated its reopening and reinvigoration of foreign investments,” it said.

However, external headwinds and geopolitical risks would make it challenging for the Kingdom to achieve an average annual growth of eight per cent seen over the past two decades.

“But we believe Cambodia’s long-term growth story remains intact, given its competitive cost structure and young population, making it one of the fastest-growing economies in the world,” said primary credit analyst Ivan Tan.

Meanwhile, National Bank of Cambodia (NBC) governor Chea Chanto said the world is facing new problems after the Covid-19 crisis, such as higher inflation, fluctuations in capital flows and currency pressures, slowing down global economic growth.

Speaking at a July 20 conference to reveal the results from the first half of 2022, Chanto reiterated that the protracted Russia-Ukraine conflict and subsequent sanctions on Moscow have raised world oil and food prices as the two Eastern European countries are both “leading exporters of raw materials such as fuel, gas, fertiliser and agricultural products”.

In Cambodia, the government has achieved great success in controlling the spread of the novel coronavirus, he said. As of July 20, over 15.11 million people – aged 3 and up – had received at least a first Covid-19 dose, representing 94.45 per cent of the estimated 16 million population, according to the health ministry.

The infection rate is lower compared to other parts of the region, Chanto said, adding that this has steadily boosted domestic economic activity.

In the manufacturing sector, export-oriented manufacturing products continued to grow, while manufacturing products serving the domestic market increased rapidly. The tourism sector has recovered positively after the government lifted health regulations for international visitors to Cambodia, increasing the number of international tourists, albeit at a slower pace.

The agricultural sector, meanwhile, continues to grow at a slower pace and has contributed to easing pressure on food prices and supporting economic growth.

“Under the influence of rising global oil and food prices, inflation in Cambodia continued to rise to 7.2 per cent in May, the highest level in more than a decade,” said Chanto.

In this situation, the NBC has come up with monetary policies to control inflationary pressures and support the recovery of economic growth.

“To control inflationary pressures, the exchange rate has been maintained to protect the purchasing power of the riel currency as well as the income of vulnerable people,” he said.

In the meantime, S&P pointed out that at the end of 2021, total restructured loans formed about 12.9 per cent of banking system loans.

A significant proportion of restructured loans were in stressed sectors affected by the pandemic, such as garment, tourism, construction, transportation and logistics.

Tan added: “We expect the banking sector’s non performing loan [NPL] ratio to marginally increase in 2022 to 2.5 per cent, given the extension of the restructuring scheme.

“We estimate about one-tenth to one-eighth of restructured loans are weak and borrowers may not be able to resume repayment after the moratorium has expired, particularly if the recovery in tourism and property sectors is delayed, which could lift the NPL ratio to three to four per cent in 2023,” he said.

MOST VIEWED

  • Hong Kong firm done buying Coke Cambodia

    Swire Coca-Cola Ltd, a wholly-owned subsidiary of Hong Kong-listed Swire Pacific Ltd, on November 25 announced that it had completed the acquisition of The Coca-Cola Co’s bottling business in Cambodia, as part of its ambitions to expand into the Southeast Asian market. Swire Coca-Cola affirmed

  • Cambodia's Bokator now officially in World Heritage List

    UNESCO has officially inscribed Cambodia’s “Kun Lbokator”, commonly known as Bokator, on the World Heritage List, according to Minister of Culture and Fine Arts Phoeurng Sackona in her brief report to Prime Minister Hun Sen on the night of November 29. Her report, which was

  • NagaWorld union leader arrested at airport after Australia trip

    Chhim Sithar, head of the Labour Rights Supported Union of Khmer Employees at NagaWorld integrated casino resort, was arrested on November 26 at Phnom Penh International Airport and placed in pre-trial detention after returning from a 12-day trip to Australia. Phnom Penh Municipal Court Investigating Judge

  • Sub-Decree approves $30M for mine clearance

    The Cambodian government established the ‘Mine-Free Cambodia 2025 Foundation’, and released an initial budget of $30 million. Based on the progress of the foundation in 2023, 2024 and 2025, more funds will be added from the national budget and other sources. In a sub-decree signed by Prime Minister Hun Sen

  • Two senior GDP officials defect to CPP

    Two senior officials of the Grassroots Democratic Party (GDP) have asked to join the Cambodian People’s Party (CPP), after apparently failing to forge a political alliance in the run-up to the 2023 general election. Yang Saing Koma, chairman of the GDP board, and Lek Sothear,

  • Cambodia's poverty cut in half from 2009 to 2019: World Bank report

    A report published by the World Bank on November 28 states that Cambodia’s national poverty rate fell by almost half between 2009 and 2019, but the Covid-19 pandemic recently reversed some of the poverty reduction progress. Cambodia’s poverty rate dropped from 33.8 to 17.8 per cent over the 10