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COVID-19: Business update

Scarlette Green / Khmer Times Share:
The usually busy Ostro Bistro restaurant and bar in Phnom Penh’s Street 136 has seen a shortage of customers. Supplied

A report says the demand for retail outlets in malls, shopping centres and restaurants has seen a gradual decline amid the COVID -19 outbreak.

Keller Williams Sen Sok regional operation principal and Sam Sn Realty Co., Ltd President Sam Soknoeun said a sharp drop in shoppers has paralysed demand for retail space. As their customers dwindle, tenants are postponing payment of rents as they wait and see what new developments the pandemic brings, he said.

The news emerged in a report by Moody’s Investors Service. Although retail demand has been steadily weakening during this outbreak, prices have not yet seen a considerable drop,” said Soknoeun. He said retail businesses have been rethinking their marketing strategies in response to the crisis – offering more discounts and special offers. Three more months of the pandemic would have a crippling effect on the retail market.  As of now, the impact has not been too severe, but if the situation persists, he believes that rents fee will drop significantly, between 20 and 30 percent.

Real estate company CBRE Cambodia director Ann Sothida stated, retail is the segment most affected by COVID-19 in the real estate market, as fear grips the Kingdom and the government implements more measures to stop the public from gathering.

However, the situation has seen marginal improvement compared with the end of the first quarter, she said. Simultaneously, Garment factory owners in Cambodia are urging brands and retailers not to cancel or postpone orders during the current Coronavirus pandemic. More than 10,000 garment workers have already been laid off as factories close their gates in Cambodia and it is feared as many as 200,000 could temporarily lose their jobs.

On the other hand, the COVID-19 pandemic has had a swift and severe impact on the globally integrated automotive industry. Cambodia’s auto market reported a very strong May following the end of activities shutdown and is now projecting a recovery after the huge loss suffered in March/April for anti- COVID-19 restrictions.

Prime Minister Hun Sen said casinos across the nation would be allowed to resume operations if they met health requirements to prevent COVID -19 outbreaks at their venues. According to a spokesperson, the prime minister announced the decision during a weekly Cabinet meeting. He said the decision took into consideration the fact that the COVID -19 situation in the country had stabilised.

Cambodia’s new gaming law will include a 7 percent tax on gross gaming revenue (GGR), while locals will continue to be barred from gambling. The primary aim of the draft legislation is to attract large investments to the country’s integrated resorts through competitive tax rates. Cambodia’s gaming industry has taken a major hit because of this pandemic.

Moody’s also says the Coronavirus-triggered global recession will continue to pressure Asia Pacific nonfinancial companies, with negative credit trends to persist through the rest of 2020.

“We expect the recovery from this recession to be prolonged, although the easing of lockdown measures should support a gradual recovery in H2. The ability of businesses to recover will depend on the pace at which consumer demand rebounds, which in turn hinges on governments’ ability to restore confidence by reducing fear of contagion,” says Clara Lau, a Moody’s group credit officer and senior vice-president.

Fiscal and monetary stimulus programmes in both advanced and emerging markets have helped stabilise financial markets and provided temporary relief to companies. However, the operating performance and financing capability of companies are vulnerable to financial market shocks,
particularly if a second wave of infection results in renewed lockdowns. Companies that remain the most affected were auto and gaming companies, with over 50 percent of issuers carrying ratings with negative implications. At the same time, the share of ratings with a stable outlook fell to 69 percent from 71 percent over the same period. Moody’s has revised its forecast for global unit sales to decline to 20 percent this year.

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