The 1st CEO Forum 2021 was held virtually under the theme “Economic Outlook and COVID Recovery of Cambodia and the ASEAN Region” and hosted by the Association of Banks in Cambodia (ABC) in collaboration with the IMF.
Despite the economic uncertainties surrounding the spark of new Covid-19 cases linked to the February 20 community outbreak, the financial sector remain stable, according to International Monetary Fund (IMF) resident representative for Cambodia Yasuhisa Ojima.
The Japanese senior economist made the remark during the 1st CEO Forum 2021 held virtually under the theme “Economic Outlook and COVID Recovery of Cambodia and the ASEAN Region” and hosted by the Association of Banks in Cambodia (ABC) in collaboration with the IMF.
The event brought together around 70 attendees from financial institutions (FI) and other stakeholders.
Ojima said the Cambodian economy is expected to grow 4.2 per cent this year and six per cent in 2022, following a 3.5 per cent contraction in 2020.
He said that the baseline growth projection will be revisited and adjusted to reflect the recent surge in novel coronavirus infections stemming from the latest outbreak.
“The financial sector looks stable mainly due to policy measures with easing financial conditions – LPCO [liquidity-providing collateralised operation], lower reserve requirement – and allowing loan restructuring until end of December 2021,” he said.
Among other measures, the National Bank of Cambodia has reduced the interest rate of LPCO, a financial tool that allows NBC to lend to FIs in the local currency, and lowered the reserve requirement rate (RRR) across all deposit tiers from eight to seven per cent on the Khmer riel and 12.5 per cent on the US dollar.
RRRs are central bank regulations that set a minimum amount of cash that FIs must hold in reserve.
However, Ojima said, uncertainties remain especially for credit to the real-estate and construction sector – including from the shadow-banking system – and the tourism industry. As long as uncertainty prevails, policy restricting the distribution of capital would be warranted on grounds of prudence, he asserted.
ABC chairman In Channy stressed that the discussion covered topics of utmost relevance in these times of economic duress. Even as the NBC recently extended loan restructuring measures until the end of this year, FIs still require a deeper understanding of how the Cambodian economy will evolve over the next few years, he said.
“With many borrowers experiencing difficulties to make their loan payments and circa 12 per cent of all loans restructured, an economic recovery is of outmost importance for borrowers as well as the financial institutions alike.
“The insights and prognoses by IMF will certainly help our institutions to prepare and to ensure the stability and long-term prosperity of our sector,” he added.
The NBC has rolled out a third phase of debt relief measures aimed at giving FIs an extra boost, enabling them to inject more loans to spur economic activity as the Kingdom struggles to rein in the February 20 community outbreak of the novel coronavirus.
The measures will “support the Royal Government's policy in addressing the challenges of, and alleviating the burden for the people affected by Covid-19”, the central bank said in a press release.
It said it will maintain the RRR at seven per cent until further notice, and continue its loan restructuring scheme until December 31.
The NBC said clients in areas cordoned off due to Covid restrictions may restructure their loans as many times as needed – removing a three-time limit. The central bank encouraged FIs to mull over reducing or waiving fees or penalties on a case-by-case scenario.
