IMF Cautions Cambodia on Credit in Real Estate Sector

Cambodia needs to be more cautious about credit in the real estate sector, according to the end-of-mission press releases issued by the International Monetary Fund (IMF) on 2 October, 2018 regarding the preliminary findings of the “2018 Article IV consultation”.

The preliminary findings (not the views of the IMF’s Executive Board) of the 23-day mission 19 (September to 2 October, 2018), show that Cambodia’s economy in 2018 will grow at 7.25% while inflation will remain relative low at 2.5%.

In regards to economic growth, the IMF said that economic activity has been strong in 2018 while growth is projected to remain robust in the near term. The real estate sector will also contribute significantly.

Although the overall outlook is positive, there are concerns about bank credit quality which will pose risks to financial and macroeconomic stability, namely 1) increasing concentration in the real estate sector and unregulated lending by real estate developers, 2) reliance on external funding, and 3) growing importance of microfinance institutions (MFI).

In addition, bank credit, which is concentrated on the real estate and construction sectors, is expected to grow around 20% in 2018 with lending by the MFI sector growing at an even higher rate.

Meanwhile, the current account deficit is projected to grow by about 10% of GDP in 2018 due to higher imports, including imports of construction materials.

The IMF argues that in order to avoid possible financial risks inthe real estate sector, the National Bank of Cambodia (NBC) must continue to implement its policies more efficiently, such as raising risk weights for real-estate lending.

The IMF will prepare the reports to the IMF’s Executive Board for discussion and decision.

- Video Advertisement -

Related Post

Cambodia Maintains the World’s Highest Central Bank Interest Rates, Defying Global Trends

In the third quarter of 2024, Cambodia continues to lead global markets, with central bank interest rates soaring between 10% and 12%, starkly contrasting with the 0% to 6% range maintained by most major economies. This divergence, detailed in a report by CBRE Cambodia published on 17 October 2024, spans from December 2021 to December […]

Cambodia’s Construction Investments Struggle to Recover as 2024 Sees Significant Drop

Cambodia’s construction sector continues to face a challenging period, with approved investment projects in 2024 falling to about 2,190, valued at under $4 billion, a stark contrast to the nearly 4,841 projects worth approximately $12 billion in 2020. The latest report from the Ministry of Land Management and Urban Planning, presented by CBRE Research on […]

Cambodia’s Tourism Rebounds to Near Pre-Crisis Levels, But Chinese Arrivals Lag Behind Regional Peers

Cambodia’s tourism sector is witnessing a robust rebound in 2024, with international arrivals reaching 4.4 million in the first eight months, a 22.5% surge compared to the same period last year. This strong performance brings the country within 1.6% of its pre-crisis peak of 6.9 million visitors in 2019, highlighting the sector’s steady recovery after […]

PwC Slapped with Record US$62.2 Million Fine and Six-Month Ban Over Evergrande Audit Failures

PwC Zhong Tian, the China arm of the global accounting giant, has been fined a record US$62.2 million and banned from auditing for six months for its failure to identify financial misstatements in China Evergrande Group’s accounts between 2018 and 2020. The penalties, the most severe imposed on an audit firm in China, are part […]

While China controls most of the real estate market, Japan continues to dominate ASEAN’s major economies

Though growing rapidly, Chinese foreign direct investment (FDI) in Southeast Asia remains more focused on tertiary industries like finance, construction, and real estate, and is particularly prominent in less-developed economies such as Cambodia, Laos, and Myanmar. According to a recent study by Guanie Lim and Chengwei Xu, China’s FDI in these sectors may complement, rather […]

Vietnam Ranks as Southeast Asia’s Least Transparent Real Estate Market

Vietnam’s real estate market has been ranked as the least transparent in Southeast Asia, placing 49th out of 89 countries and territories in JLL’s 2024 Global Real Estate Transparency Index. The report places Vietnam behind regional peers Singapore (13th), Thailand (32nd), Malaysia (33rd), Indonesia (40th), and the Philippines (45th) in terms of transparency, highlighting key […]