Moody’s says Cambodia needs to diversify exports

Global credit rating agency Moody’s Investors Services has retained Cambodia’s B2/stable sovereign rating, but said the Kingdom’s low diversification of exports puts it at a higher risk from external shocks than Vietnam. Moody’s noted that while Cambodia has smaller fiscal deficits and lower government debt, which provides it large access to concessional loans, the economy is still constrained due to its dependence on garment exports. Additionally, Moody’s placed Cambodia at a higher level of political risk than Vietnam based on the fact that foreign direct investment (FDI) could be hindered if tensions between Cambodia’s ruling party and the opposition hinder reforms. Miguel Chanco, lead ASEAN analyst for the Economist Intelligence Unit, said Cambodia could diversify its export basket to make it more resilient to shocks if it properly invests in educational reforms and increases government spending. He added that the government needs to address gaps in hard infrastructure, such as high electricity costs, if it wants to be in a good position to capture manufacturing operations that are moving out of China due to rising costs of labor there. (Source: Phnom Penh Post)