WB: High Credit Growth in Construction & Real Estate Remain Key Risks to Cambodia’s Economy

• 10 December 2021
• Local News
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The high credit growth and concentration of domestic credit in the construction and real estate sector remains a key risk to Cambodia’s financial stability despite the GDP growth rate projection of 4.5% in 2022, according to the latest World Bank report issued on 9 December.

The report added that domestic credit in the construction and real estate sector started to pick up in the last quarter of 2020 and has accelerated since, reflecting a renewed appetite for domestic investment in these two sectors.

After hitting a 2.5-year low, dropping to 6.9 percentage points in August 2020, the contribution of the construction, real estate, and mortgage sectors to domestic credit growth once again accelerated, accounting for 10.7 percentage points in May 2021, marginally below its peak of 11 percentage points before the pandemic.

As of May 2021, there was US$11 billion in outstanding credit provided to the construction, real estate, and mortgage sectors, which is equal to 33% of total credit in the kingdom.

Given the high credit the aforementioned sectors combined with other factors, the credit-to-GDP ratio, therefore, increased further to 154.9% in September 2021, up from 136% in December 2020

This is one among other risks projected by the World Bank despite the growth forest of 4.5% in 2022.

The report added that COVID-19 remain the top risk though the vaccination rollout is increasing as the virus continues to be unpredictable, and the possibility of new or existing variants of the virus spreading in the country could lead to a possible resurgence in new cases.

The slowdown in global demand is another risk that could hurt export-oriented sectors of the economy, while the tourism sector may recover even more slowly than expected, as consumers may remain reluctant to travel far distances despite eased travel restrictions. (Read more)

• Analysis
• Economy and Finance