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Leap into ‘Financial Sustainability 2021’

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Leap into ‘Financial Sustainability 2021’

Leap into ‘Financial Sustainability 2021’

Cheering news from the World Bank as a gloomy 2020 draws to an end came as the perfect pick-me-up for an uncertainty-hit Cambodian economy.

The international financial institution’s Restrained Recovery report released on December 16 revised Cambodia’s economic growth in 2021 upwards to four per cent has served as a helpful injection of confidence among the business community.

Growth is important and so is confidence in the market to reboot the economy following the Covid-19 pandemic that has been disrupting business.

Cambodia’s gradual recovery signals it can endure economic onslaughts, as it did during two previous major episodes – the 2007 Asian and 2007-8 global financial crises.

While many countries are still stuck in an economic quagmire, the Cambodian government’s swift expansionary measures and quick financial support for vulnerable communities has helped contain a major fallout since the coronavirus outbreak began wreaking havoc.

One particular measure of note is the “Covid-19 Cash Transfer Programme” that channels financial support to the needy.

The Kingdom’s banks and microfinance institutions, however, have played a crucial role in keeping the economy sound during the pandemic by providing fiscal support.

Alongside the adoption of digital banking and mobile payments, the restructuring of loans, moratoriums on payments and the rolling out of creative stimulus packages to help cash-strapped borrowers were done in a timely manner.

A revival in the manufacturing sector – with a rise in the production of bicycles, electronics and spare parts – growth in rice exports, a steady consumption of goods and services, a spurt in e-commerce and a upturn in domestic tourism have sparked optimism.

Other factors such as low inflation below three per cent and a stable riel hovering at around 4,100 to the US dollar are indicators of positivity, despite the worst GDP growth in decades.

In addition, the Kingdom’s international reserves are high – able to guarantee the import of goods and services for the next 10 months.

But some economic roadblocks could mute positive sentiments.

Restrictions on foreign travellers and flights, a rise in unemployment, an agricultural sector hit by severe flooding, a downturn in the construction and real estate sectors, and the after-effects of the partial withdrawal of the EU’s Everything But Arms scheme will remain areas of concern.

Nonetheless, with healthy loan growth, adequate liquidity and loan default risks at a minimal, the banking sector looks sturdy.

The signing of two significant trade pacts – the Regional Comprehensive Economic Partnership and the Cambodia-China Free Trade Agreement – will also further act as a fillip to future growth.

Meanwhile, the timing of the arrival of vaccines for Covid-19 will also dictate the direction of economies around the world.

For the economy, 2020 was indeed a challenging year and uncertainties continue to shroud 2021, with soothsayers loath to predict the future until this unprecedented crisis has been successfully weathered.

In this bumper year-end edition of Post Finance – with the theme “Financial Sustainability 2021” – we bring our readers an array of topics and views from captains of industry and market movers eager to usher in the coming 12 months.

The Post wishes all our readers a happy and prosperous New Year!

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