Moody’s maintains Cambodia’s credit rating at B2 with outlook stable

Moody’s Investors Service Inc maintained Cambodia’s B2 long-term issuer rating with stable outlook on the back of robust GDP growth, modest and highly affordable government debt, and low external vulnerabilities. The stable outlook balances vulnerability to shocks against stabilizing factors, the global rating agency explained, adding that the risks arise from a sharper slowdown in growth that Moody’s currently assesses driven by a collapse in asset prices, a material reduction in funding from China, or a sharper slowdown in export growth assuming EBA beneifts are withdrawn. Based on expectations of weaker growth in the Chinese economy and the assumption of a full withdrawal of EBA, Moody’s expects Cambodia’s real GDP growth to moderate to 7% in 2019 and 5.5% in 2020 from 7.5% in 2018. Stabilizing factors include modest fiscal deficits, owing in part to the effective implementation of tax policies, sustaining high affordability and low level of government debt, of which the concessional and long-term nature reduces the risk of near-term liquidity pressures for the government and the country as a whole. The agency said strong revenues have supported a healthy fiscal position, with deficits remaining well-contained at less than 2% of GDP between 2013 and 2018, but expects it to widen over the next two years, as the government undertakes stimulus measures directed at supporting the economy in the face of headwinds to export growth. However, despite an expansionary fiscal stance, Moody’s expects the govenrment’s debt burden to remain modest, hovering around or below 30% of the GDP over the next two to three years, below that of many similarly rated sovereigns. (Source: Khmer Times)