Cambodia's Financial Environment

The Highlights of the Week 2023/10/16 – 10/20 

1.    Cambodia’s growth forecast revised to 5.6% in IMF Outlook
The International Monetary Fund (IMF) recently released its "World Economic Outlook," revising Cambodia's economic growth forecast for this year slightly downward from 5.8% to 5.6%. Nevertheless, this figure surpasses last year's growth rate of 5.2%. The IMF anticipates that Cambodia will see a growth of 6.1% next year, making it the fastest-growing economy among ASEAN nations. The IMF noted that the Regional Comprehensive Economic Partnership (RCEP) would contribute to Cambodia's economic growth and diversification of exports, reducing reliance on European and American markets. In the long term, Cambodia is expected to benefit from the RCEP agreement. China is Cambodia's largest trading partner, with Cambodian exports to China reaching 1.059 billion USD in the first nine months of this year, an 18.3% year-on-year increase, while imports from China amounted to 8.04 billion USD, marking a 1.8% year-on-year growth.

2.    FDI growth for Kingdom buoyant in 2023
Foreign Direct Investment (FDI) in Cambodia continues to grow in 2023. According to the latest report from Cambodia's Council for the Development of Cambodia (CDC), Cambodia attracted nearly 3.76 billion USD in FDI during the first three quarters of 2023, representing an 8.6% increase compared to the same period in 2022 when it was 3.46 billion USD. In the first nine months, 191 investment projects were approved, a 27% increase from the 150 projects approved during the same period last year, with 141 projects located outside economic zones and 50 inside. This data indicates that foreign investment in Cambodia has rebounded after the pandemic, and foreign direct investment is contributing to Cambodia's economic growth.

3.    NBC to hike interest rates for short term loans to banks
The National Bank of Cambodia (NBC) is raising interest rates on short-term loans to banks in response to increased demand for short-term funds in the country. While the NBC is increasing short-term interbank lending rates, it is also removing restrictions on the tenor of short-term financing. This means that if banks have insufficient balances within the electronic payment system, they can still effectively address short-term gaps in their funding needs, promoting liquidity and facilitating business activities. This suggests a significant increase in short-term funding demand in Cambodia, indicating an improvement in the previously observed weakness in consumer demand.