Construction and Real Estate Continue to Pose Risks for Financial Sector in Cambodia

• 28 November 2018
• Local News
• 2177 Views

While Cambodia’s economy is expected to grow by 7.1% in 2018, the construction and real estate sectors continue to pose risk to the financial sector, according to the World Bank.

The World Bank report entitled ‘Cambodia Economic Update’ published on 28 November, 2018, highlighted that “risks in the financial sector continue to grow, with large exposure to the construction and real estate sector”.

“The growth of domestic credit in Cambodia has been faster than any other country in East-Asia”, the report said, while adding that “rising domestic credit financing the construction sector increases the financial sector’s vulnerability”. In addition, the construction sector has experienced a lengthy boom since the end of 2009.

Meanwhile, it also highlighted that the real estate sector has shifted toward more speculative activity in which there is a growing trend of land sales and purchases with less obvious or justifiable investments returns in the foreseeable future.

However, in the press release, Mr.Sodeth Ly, World Bank Senior Economist for Cambodia said that the country can take measures to curb the risks by implementing policies such as safeguarding the health of the financial sector.

In order to mitigate ‘speculative activities’, possible policies include 1) lending guidelines 2) imposing additional taxes on sales and purchases of property especially for speculative purposes, 3) revisiting the nonperforming loans to classification among other policies.

• Analysis
• Business and Market