NBC confident Cambodian economy set for robust growth ​

Content image - Phnom Penh Post
​NBC: Inflation has remained low due to sound monetary policy.

The Kingdom’s economy managed to maintain a robust growth this year despite the challenges of shrinking international trade and is expected to achieve a 5.5 per cent surplus of GDP and maintain a stable account balance.

According to the National Bank of Cambodia (NBC), the main engines of this growth were impressive showings in the garment, construction and tourism sectors, albeit a slowing down in the agriculture sector.

In its Semi-Annual Report 2019, the NBC said that it is confident that the Balance of Payment (BOP) will maintaina stable account balance and show a surplus in GDP, estimated at $741 million.

This remarkable achievement is the result of a robust inflow in the net financial account transactions despite a current account deficit, the report said.

This BOP surplus contributed to an increase in gross international reserves that now amounts to $11.1billion. This means that prospective imports of goods and services for five months are guaranteed. The figure is higher than the recommended minimum adequacy of three months that developing countries must have.

The NBC also said that the inflation rate remained relatively low and decreased to two per cent due to the implementation of prudent monetary policy. This was achieved by stabilising the exchange rate (at an average of 4,038 riel per USD) and by adjusting the supply of money in accordance with the growth of economic activities.

Broad money, (M2), grew by 21.3 per cent, similar to the growth rate in the first half of 2018. Liquidity in the banking system remained high in which excess liquidity in US dollar and in riel was 55 per cent and 3.5 times of the reserve requirement respectively.

This high liquidity has strengthened the resilience of the banking system that will enable it to withstand any unanticipated risks.

In order to strengthen monetary policy implementation, the use of riel has been promoted continuously based on market mechanisms. In this context, Negotiable Certificate of Deposit (NCDs) and Liquidity Providing Collateralized Operation (LPCO) were developed to absorb and supply of riel in accordance with the market demand.

The issuance of NCDs in US dollar slightly increased to $11 billion while the issuance of NCDs in riel decreased to 3.5 trillion riel as a result of the increase of loans in riel by banks and financial institutions.

The LPCO operations were conducted eight times during the first half of 2019, with the total bid amount of approximately four trillion riel, reflecting an increase of 11 times compared to the corresponding period in 2018.

The banking and financial sector has been developing vigorously and actively contributing to economic growth. Banks and financial institution’s assets rose by 19.2 per cent (year on year), equivalent to 166 per cent of GDP, while the size of loans and deposits reached 103 per cent and 92 per cent of GDP, respectively.

To push economic and financial development, the financial infrastructure has also been developed incrementally by modernising the payment system to promote safety and reduce transaction costs.

The NBC, also reported that it has continued to develop human resources and capacity-building through in-country, overseas, and online training programmes.

In addition, bilateral and multilateral cooperation with international institutions and other central banks have also been strengthened and broadened.

These steps are to promote a comprehensive financial integration in the region and across the globe to reinforce regional financial safety net. (Source: NBC)