## IMF Staff Completes 2019 Article IV Mission to Cambodia _IMF News, October 11, 2019_ ## Source details **Canonical URL:** [IMF Staff Completes 2019 Article IV Mission to Cambodia](https://www.imf.org/en/news/articles/2019/10/11/pr19370-imf-staff-completes-2019-article-iv-mission-to-cambodia) ## Other formats - [Markdown version](/en/news/articles/2019/10/11/pr19370-imf-staff-completes-2019-article-iv-mission-to-cambodia/index.md) - [Structured JSON version](/en/news/articles/2019/10/11/pr19370-imf-staff-completes-2019-article-iv-mission-to-cambodia/index.json) - [Bundle manifest](/en/news/articles/2019/10/11/pr19370-imf-staff-completes-2019-article-iv-mission-to-cambodia/bundle-manifest.json) ## Bibliographic details - Published: October 11, 2019 --- ### Economic outlook and key findings - Economic activity has been strong; real GDP growth is expected at around 7 percent this year. - Inflation remains stable at around 2.5 percent. - Deterioration of external conditions is expected to lead to a slowdown in growth to below 7 percent in 2020. - In the medium term, growth is expected to moderate further as the real-estate and credit cycles mature. - Export growth is expected to moderate, leading to a widening of the current account deficit to about 13.5 percent of GDP in 2019. - Large capital inflows, primarily through Foreign Direct Investment (FDI), are expected to support continued growth in foreign reserves. - Downside risks highlighted: - Ongoing Everything but Arms (EBA) review by the EU could lead to suspension of preferential trade access later next year, with large negative near-term impact. - Spillovers from a rise in global trade protectionism, hampering exports and denting investor confidence. - Weaker than expected global growth, including slower growth in China. - Risks stemming from elevated financial sector vulnerabilities. ### Fiscal performance and public debt - Robust revenue performance: tax revenues reached close to 19 percent of GDP in 2018. - 2018 fiscal balance (Government Finance Statistics Manual 2014 format) shows a surplus close to 1 percent of GDP. - Fiscal position is projected to remain in surplus in the current year. - Preliminary 2020 budget envisages continued revenue growth and increased government spending to support job creation, human capital development and a scale-up in infrastructure investment; these measures are also a contingency to mitigate near-term negative impact if EBA suspension materializes. - Revenue Mobilization Strategy (2019-23) is expected to help sustain revenue growth through tax policy and revenue administration reforms. - Public debt remains low at 28.6 percent of GDP in 2018 and Cambodia is expected to remain at low risk of debt stress despite increased debt disbursements and Public-Private Partnerships (PPPs) to finance infrastructure. ### Financial sector vulnerabilities and macroprudential stance - Private sector credit has accelerated and is increasingly concentrated in the real-estate and construction sectors; credit is expected to grow around 28 percent in 2019. - Lending by real-estate developers remains largely unmonitored and unregulated; official data on real-estate prices are not yet available. - The authorities have implemented macroprudential measures and launched the first Financial Stability Review in April 2019. - Priority policy measures recommended to address elevated financial sector vulnerabilities: - Implement targeted policies such as higher risk weights and provisioning requirements for real estate lending. - Introduce a prudent aggregate loan-to-value limit for real-estate lending. - Consider additional macroprudential measures to moderate credit growth, such as gradually raising reserve requirements on foreign currency liabilities. - Promptly address shortcomings in the AML/CFT regime to reduce financial risks. - Further financial market development and increase in local currency use to strengthen resilience over the medium term. ### Structural reforms, SDGs, and policy priorities - Stable macroeconomic environment, strong growth performance and ongoing structural reforms have contributed to significant progress towards Sustainable Development Goals (SDGs). - To solidify progress towards SDGs by 2030, policies should address spending needs in health, education and infrastructure. - Additional expenditures should be oriented towards priority infrastructure investment, health and education, while ensuring gains in spending efficiency. - Prudent fiscal stance should be supported by restraining non-development current spending. - Accelerated implementation of structural reforms is needed to reduce structural constraints to growth, address governance and corruption weaknesses, promote sustainable development, and improve data quality and transparency. ### IMF engagement and concluding remarks - An IMF team led by Mr. Jarkko Turunen visited Phnom Penh from September 30 to October 11, 2019, for the 2019 Article IV consultation. - The IMF stands ready to support the authorities’ reform efforts through policy advice and capacity development activities. - The IMF team held discussions with the Royal Government of Cambodia, National Bank of Cambodia, other public agencies, and a wide range of stakeholders, and expressed appreciation for the constructive engagement. *Press Release No. 19/370 — October 11, 2019.* --- ## References - [Cambodia and the IMF](http://www.imf.org/external/country/KHM/index.htm) - [IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance) - [Press Releases](https://www.imf.org/en/news/searchnews) - [PRESS CENTER](http://presscenter.imf.org/) - [https://www.imf.org/en/home](https://www.imf.org/en/home) _Source: https://www.imf.org/en/news/articles/2019/10/11/pr19370-imf-staff-completes-2019-article-iv-mission-to-cambodia_