Moody’s Investors Service Inc today maintained the stable outlook on Cambodia while affirming its long-term issuer ratings at B2 on the back of robust gross domestic product (GDP) growth prospects, modest and highly affordable government debt, and low external vulnerabilities.
For in depth analysis of Cambodian Business, visit Capital Cambodia
In a statement, the global credit ratings agency said these buffers offset risks stemming from a sustained, high rate of credit growth which raises contingent liability risks for the government, if it needs to support Cambodia’s relatively large financial system through a boom-bust credit cycle.
“Low institutional strength and a high degree of dollarisation act as continued constraints
on the government’s ability to manage shocks,” it said.
Commenting on the stable outlook which reflects balanced risks, Moody’s warned that growth could moderate by more than its estimates following the expected reduction of tariff benefits enjoyed by exports to the European Union (EU).
In addition, slowing growth in China could also present spillover risks for Cambodia, due to its deep economic and financial linkages with the country.
Based on expectations of weaker growth in the Chinese economy and the assumption of a full withdrawal of Everything But Arms benefits, Moody’s expects Cambodia’s real GDP growth to moderate to 7 percent year-on-year in 2019 and
5.5 percent in 2020, from 7.5 percent in 2018. However, even at these projected slower rates, Cambodia is still among the fastest growing
sovereigns at the B2-rating level.
“The relatively low levels of government debt and increasing tax revenues provide space for fiscal policy to offset a shock to growth,” it added.