Cambodia: Selected Issues

December2022 CAMBODIA SELECTEDISSUES IMFCountryReportNo.22/372 ThispaperonCambodiawaspreparedbyastaffteamoftheInternationalMonetaryFundasbackgrounddocumentationfortheperiodicconsultationwiththemembercountry.ItisbasedontheinformationavailableatthetimeitwascompletedonNovember8,2022. Copiesofthisreportareavailabletothepublicfrom InternationalMonetaryFundPublicationServicesPOBox92780Washington,D.C.20090Telephone:(202)623-7430Fax:(202)623-7201 E-mail:publications@imf.orgWeb:http://www.imf.orgPrice:$18.00perprintedcopy InternationalMonetaryFundWashington,D.C. ©2022InternationalMonetaryFund November8,2022 CAMBODIA SELECTEDISSUES PreparedbyJulianaAraujo,AlessiaDeStefani(APD),andLuisaZanforlin(ICD). ApprovedBy AsiaandPacificDepartment CONTENTS RISKSRELATEDTOPRIVATESECTORDEBT3 A.RisingPrivateSectorDebtAndItsComposition3 B.AssessingRisksFromPrivateSectorDebt5 FIGURES 1.PrivateSectorCreditGrowthAndNGDPGrowth(Y-O-Y)3 2.FXLoan-To-DepositRatio3 3.PrivateSectorCreditToGDPCompared4 4.PrivateSectorCredit(InPercentofGDP)4 5.PrivateSectorCreditContributions4 6.PrivateSectorCreditByInstitution(2021)4 7.CompositionofCorporateSectorCredit5 8.CorporateSectorCredit5 9.StockOfRestructuredLoans6 10.Non-PerformingLoans6References7 DISTRIBUTIONALIMPLICATIONSOFRISINGENERGYPRICES8 A.RecentPriceTrends8 B.Methodology9 C.PovertyAndFiscalCostsUnderFourEnergyPricesScenarios9 FIGURES 1.InflationbySelectedProductGroups8 2.ConsumerPriceInflation:Weights8 3.ElectricityGenerationbySource10 CAMBODIA 4.PovertySharesandFiscalCostsunderThreeEnergyPriceScenarios10References11REVENUEMOBILIZATION12 A.Excises13 B.PropertyTaxes14 C.TaxIncentives16 BOXES 1.RecommendationsonExcises14 2.RecommendationsonPropertyTaxes15 3.RecommendationsonTaxIncentives16 FIGURES 1.TaxRevenue12 2.IncomeTax,DomesticVATAndExcises13 3.ImportDuties,LocalTaxAndNonTaxRevenues13 MACROPRUDENTIALPOLICIES18FIGURE 1.MacroprudentialPolicyStance19 TABLE 1.MacroprudentialToolkit20 2INTERNATIONALMONETARYFUND RISKSRELATEDTOPRIVATESECTORDEBT1 Privatedebtrecordeddouble-digitgrowthratesformanyconsecutiveyears,exceedingbyfarthegrowthrateofoutput.Creditgrowthcontinuedtobesustainedevenduringthe2020recession.Privatesectordebtisnowexpectedtoexceed180percentofGDPbytheendof2022.Thisratioissignificantlyabovelevelsregisteredamongregionalpeers,eventhosewithhigherpercapitaGDP.WhileCambodianhouseholdsareincreasinglyleveraged,thelargestshareofprivatedebtpertainstothecorporatesector.Corporatedebtisnotconcentratedinrealestate,butratherisbroadlydistributed,withalargeandincreasingsharepertainingtocompaniesactiveintrade(retailandwholesale).10percentoftheoverallstockofprivatedebt(17percentofGDP)hasbeenrestructuredatleastoncebetween2020and2021,indicatingthepotentialforsizeablestresstolendersiftheseloansrequiredtobewrittenoffentirely. A.RisingPrivateSectorDebtanditsComposition Figure2.Cambodia:FXLoan-to-DepositRatio (Inpercent) 1.Privatesectorcredithasbeengrowingatafasterpacethannominaloutputanddepositsforseveralconsecutiveyears.Double-digitgrowthratescontinuedevenin2020,despitetherecession.Beforethepandemic,creditwasgrowingabove25percentayear,almostthreetimestherateofnominaloutputgrowth;evenduringthe2020recessionandtheslow-pacedrecoveryin2021,creditgrowthtotheprivatesectorhasbeeninthedoubledigits.Bytheendof2021,87percentofprivatedebtwasdenominatedinforeigncurrency(predominantlyUSD).Giventhehighrateofdollarization,mostdepositsarealsoUSD-denominated(83percent);buttheFXloan-to-depositratiohasbeensteadilyincreasingsince2018. Figure1.Cambodia:PrivateSectorCreditGrowthandNGDPGrowth(y-o-y) (Inpercent) 1ThisannexwaspreparedbyAlessiaDeStefaniandLuisaZanforlin. INTERNATIONALMONETARYFUND3 Figure3.Cambodia:PrivateSectorCredittoGDPCompared (Inpercent,2021) 2.ThestockofprivatedebtinCambodiaisveryhighbyinternationalstandards.Debtkeptrisingalsoin2020and2021,despitetherecessionandtherelativelyslowpaceoftherecovery.PrivatedebtlevelsinCambodiawere170percentofGDPbytheendof2021,exceedingbyawidemargintheratiosregisteredinotherlowandmiddle-incomecountriesintheregion.Bytheendof2022,outstandingcredittotheprivatenon-financialsectorisexpectedtosurpass180percentofGDP,continuingasteeptrendofprivatedebtaccumulationobservedoverthepastfewyears. Figure4.Cambodia:PrivateSectorCredit (InpercentofGDP) 3.Mostdebtisconcentratedinthecorporatesectorandsitsincommercialbanks,ratherthaninmicrofinanceinstitutions.Between2018and2021,theratiooftotalcredittooutputgrewby72percentagepoints—inabsoluteterms,mostoftheincreasecanbeexplainedbytheriseincorporatecredit,whichincreasedby42percentagepoints,reaching107percentofGDPin2021.Bycomparison,the26percentagepointsincreaseinhouseholdliabilities(includingmortgages,personalloans,creditcards,andallMFIborrowing)ismoremodest,evenifoutstandinglevelsarestillrelevant.Intermsoflendinginstitutions,commercialbanksarebyfarthelargestplayers,holding83percentoftheUS$45billionoutstandingattheofend2021.Notmuchinformationisavailableonthecompositionofcreditheldbymicrofinanceinstitutions(MFIs).However,fromthepointofviewofsys