Press Release No. 18/92

IMF Staff Completes a Staff Visit to Cambodia

March 17, 2018

• Cambodia’s near-term economic outlook remains positive with GDP growth at around 7 percent.
• Policies should focus on managing macro-financial risks, safeguarding fiscal sustainability and advancing reforms to support growth, resilience and inclusion.
• A medium-term budget framework with a new revenue strategy is needed to safeguard fiscal sustainability.

An IMF team led by Mr. Jarkko Turunen visited Phnom Penh from March 12 to 16, 2018, to conduct interim discussions on recent developments and Cambodia’s economic outlook.

Upon conclusion of the visit, Mr. Turunen issued the following statement:

“Cambodia’s economy continues to grow at around 7 percent, supported by higher public spending and robust construction and tourism activity, while inflation declined to 2.0 percent in January 2018. The current account deficit is estimated to have remained broadly stable at 8.4 percent of GDP in 2017 and foreign reserves continued to grow, reaching US$8.9 billion in January 2018.

“Cambodia’s economic outlook remains positive, but is subject to downside risks. Macro-financial and external risks, as outlined in the 2017 staff report, remain significant and political uncertainties could dampen consumer and investor sentiment. On the upside, stronger global growth may increase foreign demand for goods exports and tourism.

“Policies should focus on managing macro-financial risks, safeguarding fiscal sustainability and advancing reforms to support growth, resilience and inclusion.

“Bank credit growth has moderated somewhat to 17.2 percent in January 2018, but credit growth to real estate and construction related activities continues to grow at a higher pace than credit to other sectors. Recently introduced credit risk and capital buffer regulations are welcome: implementation of these, as well as further steps as outlined in the 2017 Article IV report, are needed to build resilience.

“The general government deficit is estimated to have widened to 2.6 percent of GDP in 2017, as continued revenue growth was more than offset by higher spending. Government deposits, a key fiscal anchor, increased to 12.6 percent of GDP and public external debt remained relatively low at US$6,671 million (about 30 percent of GDP) at end-2017. The 2018 budget includes further increases in public wages and capital spending, highlights education, health and social protection among priority development areas, and targets a higher deficit at about 5 percent of GDP. A medium-term budget framework with a new revenue strategy is needed to safeguard fiscal sustainability as recommended in the 2017 staff report.”

The team held constructive and candid discussions with senior officials of the Royal Government of Cambodia, National Bank of Cambodia, and other public agencies, as well as a wide range of stakeholders, including representatives of the business and banking sectors, think tanks, and development partners. We would like to express our appreciation to the Cambodian authorities for their hospitality and productive discussions over the last week.