No.29 (Mar 19, 2021)

Market Industry Trend

CMA MEMBERS RESTRUCTURE $1.4B IN LOANS. Financial institutions that are members of the Cambodia Microfinance Association (CMA) restructured some $1.397 billion in loans for 289,422 borrowers as of February 28 since the National Bank of Cambodia (NBC) issued a circular on loan restructuring during Covid-19. Based on CMA data, the total number of applicants who apply for credit restructuring during the period was 307,875 borrowers. The figures can be translated to an approval rate for loan restructuring of 94%. Small and medium-sized enterprises (SME) account for the greater part of restructured loans. NBC’s loan-restructuring directive was issued to all banks and financial institutions to restructure credit for loans in four priority sectors – tourism, garments, construction, and transport and logistics, which NBC flagged as the most severely affected by the pandemic. This directive will be implemented until mid-2021. (Phnom Penh Post)

KINGDOM JOINS ASEAN SECURITIES PLAN. The Securities and Exchange Regulator of Cambodia (SERC) and its nine capital-market-regulator counterparts in ASEAN had recently signed a new 5 years Action Plan 2021-2025 during the ASEAN Capital Market Forum (ACMF). The action plan sets out three strategic objectives, namely – fostering growth and recovery with sustainability; promoting and sustaining inclusiveness; and strengthening and maintaining orderliness and resilience. The five key priorities that support the strategic objectives are – driving higher levels of transparency and disclosure; continuing with regulatory harmonization; intensifying capacity building; amplifying communication and awareness building, and strengthening cooperation and coordination within the bloc’s financial community. Since Cambodia Securities Exchange (CSX) inception, the companies have raised a combined $253 million as of September 30. The stock index increased 58.37% in 2019 over 2018 but declined 14.93% in 2020. (Phnom Penh Post)

Macro-economy

ECONOMIC FORECAST FOR 2021 PROJECTS 3.5 PERCENT GDP GROWTH. According to the macroeconomic situation report of the Ministry of Foreign Affairs and International Cooperation, Cambodia is forecasted to register a Gross Domestic Product (GDP) growth of 3.5% and will gradually reach 6.9% by 2024. The industrial sector is poised to fuel the bulk of that growth, followed by services, real estate, and business and agriculture. The overall industrial sector is forecasted to grow by 5.9%, the garment segment is expected to grow by 4.6% and the growth for the construction sector is 2.9%. It is projected that the transportation and communications segments will grow by 4.5%, the hotel and restaurant segment will grow by 0.3% and the service sector will grow by 3.4%. The 2021 projection sees the wholesale and retail trade services segment growing by 3.2%, and the agriculture sector is projected to grow by 1.3%. Inflation is projected to rise to 3.1% this year due to an expected increase in international oil prices. The value of the riel against the $US is predicted to drop to 4,065 riels from 4,080 in 2020. (Khmer Times)

EU PLEDGES $510 MILLION TO CAMBODIA IN 2021-2027. Based on a statement by the Council of Development of Cambodia (CDC), the European Union (EU) plans another $510 million in aid for Cambodia to help the country boost its economic development in the 2021-2027 period. The aid will go toward improvements in agriculture, education, and the country’s governance. According to EU ambassador to Cambodia Carmen Moreno, the draft of EU’s Strategy on Development Cooperation for Cambodia in 2021 and the EU Multiannual Indicative Program 2021-2027 have just been finalized and will be submitted for discussion for more input in the discussion meeting between Cambodia, the EU, and the EU’s partners. Since 1992, EU partners, 10 member countries of EU, and the Swiss Confederation have supported Cambodia with $4.2 billion, which is equivalent to 19% of the country’s total cooperation financing. (Khmer Times)

CHINA RATIFIES THE WORLD’S LARGEST FREE TRADE DEAL. The Chinese government has officially ratified the Regional Comprehensive Economic Partnership (RCEP) agreement, according to Chinese media agency Xinhua. It becomes the second nation after Thailand to do so. All 10 ASEAN members and China, Japan, the Republic of Korea, Australia, and New Zealand signed the long-awaited Asia-Pacific RCEP agreement, the world’s largest free trade agreement, in mid-November 2020. Upon full ratification it will be the largest trade deal in the world, creating a market of 2.2 billion people with a gross domestic product (GDP) of close to $26.2 trillion, based on 2019 data. The ratification brings renewed hopes for comprehensive change in the flow of regional trade and investment and the promotion of intra-bloc supply chains capable of bolstering trust among members of the region’s business sector. Another 13 countries, including Cambodia, are still completing internal procedures to enable them to seek ratification. According to the spokesperson for Ministry of Commerce Seang Thay, the necessary documents for ratification are prepared and will be sent to the Council of Ministers for checking and approval before continuing the procedure to seek full ratification from the National Assembly. Cambodia is expected to receive the ratification by the second half of 2021. (Khmer Times)

CAMBODIA’S EXPORT TO VIETNAM INCREASE. Cambodia’s exports to Vietnam rose in 2020 despite both nations imposing strict cross-border movement control to fight the pandemic. Data from the Ministry of Commerce showed Cambodia’s exports to Vietnam rising by 14.8% in 2020 to $385 million. Cambodian imports from Vietnam decreased by 3.1% to $2,633 million. Bilateral trade between the countries amounted to $3,018 million, a year-on-year decrease of 1.13%. Cambodia’s main exports to Vietnam are raw agricultural products such as rice, milled rice, cashew nuts, and rubber. Imports are mainly steel, petrol, garments, and textiles, leather, and footwear. (Khmer Times)