On September 22, 2017, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Cambodia.1
Cambodia’s economy is expected to grow by 6.9 percent this year, with moderating private investment offset by higher public spending and robust construction and tourism activities. Headline inflation rose to 3 percent in 2016 and 3.5 in the first half of 2017, mainly driven by higher food and energy prices.
Overall credit growth has slowed, owing in part to policy measures. Real estate sector-related bank credit growth, however, remains strong, supported by demand for housing from Cambodia’s young and growing middle-income population.
The current account deficit narrowed to 8.8 percent of GDP in 2016. Driven by strong FDI inflows, foreign reserves have continued to grow, reaching $7.9 billion in June 2017, about 5.5 months of next year’s imports.
While the authorities again outperformed their revenue target in 2016, higher current spending resulted in an increase of the fiscal deficit to around 2.8 percent of GDP (compared with 1.6 percent in 2015). The fiscal deficit is expected to widen further this year due to higher public sector wages and other election-related current spending.
Looking ahead, the outlook is positive, although challenges remain. Real GDP growth is projected to remain robust over the next few years. Growth is then expected to slow over the medium-term to around 6 percent, due to moderation in the credit and real-estate cycles and ongoing challenges in improving economic diversification and competitiveness.
Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.
At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country’s authorities. An explanation of any qualifiers used in summings up can be found here: http://www.imf.org/external/np/sec/misc/qualifiers.htm.