ADB says real estate credit poses challenge to Cambodia’s GDP growth

• 7 October 2019
• Local News
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The Asian Development Bank (ADB) has recently forecasted that Cambodia’s GDP to grow at 7.0% this year while suggesting that the country should reduce financial risk poses by credit on the real estate sector.

According to the recent press release of its latest report, Cambodia’s growth remains driven by the four traditional sectors such as garments, tourism, trade, and construction, but with the changes in the global trading environment, the country needs to focus on diversification strategy.

“This will require reducing risks emanating from lending to an overheated real estate sector, development of more skilled and productive workforce to justify rising wages, and attracting high-quality capital investment—all of which, in turn, need strong governance and institutions,” said ADB Country Director for Cambodia Ms Sunniya Durrani-Jamal.

As part of the Asian Development Outlook (ADO) 2019, the report shows that credit to the private sector was up by 26.4% year on year in June 2019, when bank lending for real estate was up by 37.2%, mortgages by 39.4%, and construction by 32.1%.

According to a figure from the Credit Bureau Cambodia (CBC), as of June 2019, consumer loan balance (personal finances, credit card, and mortgage) totalled to about US$7.18 billion with mortgage accounts to about 47.79% (about US$3,4 billion).

The report came as mortgage applications in Cambodia saw a sharp drop of nearly 40% in the second quarter of 2019 compared to the previous quarter, especially in the coastal region areas which saw the sharpest decrease of 49%. (Read more)

“An external risk to the growth outlook in the near term is the possibility that the European Union will suspend, in part or in full, Cambodia’s preferential trade status under the Everything But Arms…A domestic risk is a continued buildup of credit to real estate and related businesses,” the report noted.

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