Cambodia in risk of overheating

Cambodia in risk of overheatingCheap 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.



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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...

Cambodia in risk of overheatingCheap 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.



Support ASEAN news

Investvine has been a consistent voice in ASEAN news for more than a decade. From breaking news to exclusive interviews with key ASEAN leaders, we have brought you factual and engaging reports – the stories that matter, free of charge.

Like many news organisations, we are striving to survive in an age of reduced advertising and biased journalism. Our mission is to rise above today’s challenges and chart tomorrow’s world with clear, dependable reporting.

Support us now with a donation of your choosing. Your contribution will help us shine a light on important ASEAN stories, reach more people and lift the manifold voices of this dynamic, influential region.

$
Personal Info

Donation Total: $10.00

 

 

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