A recent IMF mission to Cambodia, led by Kenichiro Kashiwase from September 17-30, identified several risks that could threaten the country's economic outlook in 2024, despite a projected growth rate of 5.5%. While key sectors such as garment exports, agriculture, and tourism are driving recovery, construction and real estate are undergoing corrections after years of rapid expansion. Rising private debt levels and non-performing loans (NPLs), which have reached 6% of total loans, particularly in the tourism and real estate sectors, pose significant risks to Cambodia’s financial stability. The IMF warned that if these vulnerabilities persist, they could undermine future economic growth.
Though inflation has moderated to an average of 1.6% in the first half of 2024, it remains a concern, as it is expected to rise toward 3% in the long term. The IMF also highlighted growing fiscal pressures, noting that Cambodia’s fiscal deficit stood at 2.8% of GDP in 2023 and is projected to rise to 3% in 2024. Declining tax revenues, increased tax exemptions, and delays in infrastructure projects have all contributed to this deficit, with public debt expected to increase moderately over the next decade. Despite these fiscal challenges, the IMF assessed that Cambodia’s risk of debt distress remains low but stressed the need for corrective measures to maintain fiscal stability.
In response to these challenges, the IMF recommended that Cambodia focus on rebuilding its fiscal buffers, improving tax revenue collection, and phasing out COVID-19-related forbearance measures to reduce financial sector risks. Strengthening monetary policy frameworks and improving financial supervision, especially in real estate lending, were also key suggestions. Additionally, the IMF emphasized the importance of structural reforms to boost productivity, improve human capital, and diversify growth drivers to ensure sustainable and inclusive long-term economic development.
