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Moody’s maintains ‘Stable’ outlook for Cambodia
US credit rating agency Moody’s Investors Service said Wednesday it was maintaining its B-2 rating and stable outlook for the Government of Cambodia.
“The stable outlook balances vulnerability to shocks stemming from what we view as a temporary disruption in growth, high dollarisation and potential financial vulnerabilities; against strong growth potential, robust government revenue generation and the concessional and long-term nature of government debt,” Moody’s said.
In its annual credit analysis released in Singapore, the agency said: “We would consider upgrading the rating if reforms were implemented that addressed institutional weaknesses and enhanced policy effectiveness.
“Structural reforms to boost competitiveness and reduce hurdles to doing business would also be credit positive because it would contribute to increases in economic diversification and incomes,” it said.
But a “prolonged slowdown in growth, and a collapse in credit growth that presented contagion effects for the domestic economy” could trigger a rating downgrade.
“We would also consider downgrading the rating if foreign direct investment inflows fell sharply for a sustained period, which would contribute to significantly lower GDP growth prospects and raise pressure on financing of the current account deficit.”
The analysis said Cambodia’s credit profile reflected its “strong GDP growth prospects and moderate, highly affordable government debt burden.
“These factors are balanced by potential risks to financial stability stemming from sustained high levels of credit growth, weak institutional framework, and geopolitical risks,” it added.
Moody’s said it expected Cambodia’s growth to expand by 2.9 percent this year — reversing an estimated 3.0 percent contraction last year but well below average growth of 7.0 percent between 2010 and 2019.
“Under our assumptions, economic growth rates will not fully recover to pre-pandemic levels until at least 2022,” the rating agency said.
“Moreover, an ongoing resurgence of coronavirus infections poses significant downside risks to the growth recovery.”
Moody’s said the pandemic had put “significant strain” on Cambodia’s economic growth drivers.
“Travel restrictions have largely shut down the country’s tourism and hospitality sector,” it said.
Economic slumps in the large export markets of the EU and the U.S. have meanwhile “weighed heavily” on garment exports which comprise more than 60 percent of total exports. Sao Da – AKP