Economic Growth Expected in 2017

Cambodia’s financial sector is set to enjoy strong growth next year as the expected total outstanding loans and deposits grew roughly 20 percent compared with last year due to good economic practices.

According to a report by the National Bank of Cambodia (NBC) titled “The Macro Economy Progress and 2016 Banking Sector and the Vision 2017,” outstanding loans within the banking sector hit $17.6 billion, up 18.3 percent, and deposits reached $15.4 billion, up 20.7 percent.

“The banking sector continues to grow strongly and to contribute to the sustainable and inclusive growth of economic activities,” the report said.

“The banking system is healthy [with]…the high level of liquidity in both the banking and financial sector, while the non-performing loans are very low at 3.5 percent and one percent respectively.”

In Channy, the president and group CEO of Acleda Bank, the largest locally owned bank, said there was growth in outstanding loans amounting to $2.79 billion, up 13 percent, while deposits rose by 20 percent, reaching $3.2 billion.

“Of course, we see that a demand for the source of funds for business expansion activities is still there. Our economy is doing very well,” he said.

While Mr. Channy noted that the economy has seen strong growth this year, he also recognized that the industry did experience a slowdown when bad weather conditions affected agricultural loans early in 2016.

Despite the setback, Acleda managed to garner $120 million in profits after tax by the year’s end, he said.

Stephen Higgins, the managing partner of consulting firm Mekong Strategic Partners, also acknowledged this year’s economic slowdown stemming from poor yields from the agriculture industry, but noted that the rate was still better than other countries and also far more sustainable.

He also lauded regulators who remained active throughout 2016 and managed to keep the industry healthy and manageable.

“Overall the MFI sector was probably a little surprised by how much growth slowed this year from the extremely high rates the year before, and was a little slow pulling back on cost growth. We don’t expect that to be an issue in 2017,” Mr. Higgins said.

“The regulator has been quite active in the past year in terms of new regulations to protect the health of the system and in turn, protect the users of the system such as depositors. Overall, we would give the regulator high marks for what they’ve been doing,” he added.

NBC governor Chea Chanto said in the latest quarterly report that the slowdown earlier in the year was attributed to the “US Federal Reserve, Brexit, the deterioration of China’s economy and global financial uncertainty,” but added that Cambodia’s garment, property and construction sectors remained strong during the first and second quarters.

He said these same sectors will remain the backbone of the economy, while the agricultural sector recovered “along with the global economy and normalization of the weather.”