Cambodia in risk of overheating

Reading Time: 1 minute

Cheap credit sloshing around Cambodia’s private sector could pose greater risks to development, the IMF has warned in their annual report on the country.

Over the past year, banks have been slashing interest rates to win customers, stoking private sector credit by almost one third and thus fueling breakneck economic growth.

In 2012, Cambodia expanded by over 7 per cent, and the World Bank expects it to remain the second fastest growing economy in the region over the next few years.

However, such as been the voraciousness of loan purchases that Cambodia’s borrowing levels have hit 37 per cent of the country’s total economic output, a ratio that is commonly believed to be highly unhealthy for underdeveloped nations.

The specter of a burnout lingers not far in the country’s past. In 2008, a similar surge in credit led to a rough and tumble property cycle.

In response to the warning, The National Bank of Cambodia has confirmed that it will begin taking measures to tighten and slow down lending.

Once such measure was a recent raise of in the amount of reserves banks need to hold, moving up the bar for access to cash.

However, the IMF has pointed out that more steps are needed and that moving the revenue rate up doesn’t necessarily guarantee lower lending.

Do you like this post?
  • Fascinated
  • Happy
  • Sad
  • Angry
  • Bored
  • Afraid

Reading Time: 1 minute

Cheap credit sloshing around Cambodia’s private sector could pose greater risks to development, the IMF has warned in their annual report on the country.

Reading Time: 1 minute

Cheap credit sloshing around Cambodia’s private sector could pose greater risks to development, the IMF has warned in their annual report on the country.

Over the past year, banks have been slashing interest rates to win customers, stoking private sector credit by almost one third and thus fueling breakneck economic growth.

In 2012, Cambodia expanded by over 7 per cent, and the World Bank expects it to remain the second fastest growing economy in the region over the next few years.

However, such as been the voraciousness of loan purchases that Cambodia’s borrowing levels have hit 37 per cent of the country’s total economic output, a ratio that is commonly believed to be highly unhealthy for underdeveloped nations.

The specter of a burnout lingers not far in the country’s past. In 2008, a similar surge in credit led to a rough and tumble property cycle.

In response to the warning, The National Bank of Cambodia has confirmed that it will begin taking measures to tighten and slow down lending.

Once such measure was a recent raise of in the amount of reserves banks need to hold, moving up the bar for access to cash.

However, the IMF has pointed out that more steps are needed and that moving the revenue rate up doesn’t necessarily guarantee lower lending.

Do you like this post?
  • Fascinated
  • Happy
  • Sad
  • Angry
  • Bored
  • Afraid