World Bank: Prolonged Construction Boom in Cambodia Needs Close Monitoring

• 18 April 2018
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A prolonged construction and property boom as well as the increase of credit given to the construction and real estate sectors could be downside risks for Cambodia despite the 6.9 percent GDP prediction for 2018, according to a World Bank outlook report.

The World Bank recently released its outlook report for Cambodia, and 6.9 percent GDP growth is predicted. However, the same report also emphasised several downside risks including a prolonged construction and property boom, the growth of credit to the construction and real estate sectors, and declining external competitiveness.

A huge amount of construction projects have been undertaken in Cambodia during the past decade. 3,052 construction projects were recorded in Cambodia in 2017 representing an increase of 22.31 percent year-on-year from 2016, according to the annual report by the Ministry of Land Management, Urban Planning and Construction (MLMUPC).

Meanwhile, the credit given to the construction and real estate sector also increased rapidly. Comparing from May to November 2017, credit has increased from 28.4 to 37.1 percent, according to the World Bank report.

Due to this rapid acceleration, to avoid the possibility of unpredicted economic risk, the report suggested that there should a close monitoring of the construction and real estate sectors. More significantly, it is also very necessary to reduce the scope for speculative activities within the industry.

However, in terms of overall economics the country itself is going well, where China is the largest sources of foreign direct investment (FDI) and tourists to Cambodia. In 2017, Cambodia attracted fixed asset investment of 1.43 billion U.S. dollars from China, or 27 percent of the total investment in the country last year, according to Xinhua Net.