Credit Trends in Cambodia by Economic Sector (October 2024)

As of October 2024, total credit disbursed across various economic sectors in Cambodia stood at 247,631 billion KHR, marking a 2.2% year-on-year increase. The distribution of credit and its year-over-year growth varied significantly across sectors, reflecting different economic dynamics and challenges. Here's a closer look at the key sectors and the factors influencing their growth or decline:

1. Wholesale and Retail Trade

Credit Volume: 60,926 billion KHR
Year-over-Year Growth: +0.01%
Share: 24.6%

Wholesale and retail trade remains the largest sector by credit share. However, its negligible growth suggests market saturation or a potential slowdown in consumer spending. External factors, such as global economic uncertainties and fluctuating commodity prices, may have played a role in the stagnation.

2. Construction

Credit Volume: 29,199 billion KHR
Year-over-Year Growth: +33.3%
Share: 11.8%

The construction sector showed the most significant growth among all sectors. This surge is likely driven by large-scale infrastructure projects, urbanization trends, and foreign investment, especially in commercial and residential developments. Government incentives and relaxed regulations for real estate development may also have contributed to this growth.

3. Mortgages (Owner-Occupied Housing Only)

Credit Volume: 27,686 billion KHR
Year-over-Year Growth: -3.9%
Share: 11.2%

The decline in mortgage credit could be attributed to rising interest rates or stricter lending policies by financial institutions. The slowdown in household purchasing power or a shift in consumer preference towards rental housing may also have impacted this segment.

4. Real Estate

Credit Volume: 24,863 billion KHR
Year-over-Year Growth: +17.8%
Share: 10%

Growth in real estate credit indicates continued demand for commercial and high-end residential properties. The rise of industrial parks and tourism-related properties, coupled with Cambodia’s increasing attractiveness as a destination for foreign investors, has likely fueled this growth.

5. Agriculture

Credit Volume: 23,759 billion KHR
Year-over-Year Growth: +0.9%
Share: 9.6%

The modest growth in agricultural credit reflects stability in the sector. However, challenges such as climate change, fluctuating crop prices, and the slow adoption of modern farming technologies may be limiting faster expansion.

6. Services

Credit Volume: 19,586 billion KHR
Year-over-Year Growth: +5.8%
Share: 7.9%

The service sector, which includes tourism, healthcare, and education, witnessed moderate growth. The recovery in tourism post-pandemic and increased investment in healthcare and education could have contributed to the sector’s expansion.

7. Manufacturing

Credit Volume: 10,367 billion KHR
Year-over-Year Growth: -5%
Share: 4.2%

The decline in manufacturing credit highlights challenges such as global supply chain disruptions, increased competition, and a potential slowdown in garment exports. Limited diversification within the sector may also be a factor.

8. Household

Credit Volume: 2,591 billion KHR
Year-over-Year Growth: -60.4%
Share: 1.1%

Household credit experienced the steepest decline, reflecting tightening financial conditions and reduced household borrowing capacity. Rising living costs or repayment challenges could be influencing this contraction.

9. Others

Credit Volume: 48,654 billion KHR
Year-over-Year Growth: +0.8%
Share: 19.6%

This category encompasses miscellaneous sectors, showing slight growth likely driven by diversification in financial support for smaller or emerging industries.

Key Takeaways

The Cambodian economy continues to evolve, with sectors like construction and real estate leading in credit growth, while others, such as manufacturing and household, face challenges. Policymakers and financial institutions need to strike a balance by fostering growth in emerging sectors while addressing the barriers in declining ones to ensure sustainable economic development.

Source: National Bank of Cambodia

Comments

The Principle of Independence in Demand Guarantees

Demand guarantees are a common tool used in international trade to provide assurance to the beneficiary that they will receive payment for goods or services rendered. These guarantees are often issued by banks and serve as a form of security for the beneficiary in the event that the applicant fails to fulfill their obligations. One of the key principles governing demand guarantees is the principle of independence. This principle dictates that a demand guarantee is separate and independent from the underlying transaction between the applicant and the beneficiary. In other words, the issuer's obligation to pay under the guarantee is not contingent upon the performance or non-performance of the underlying contract. This principle is enshrined in international standards such as the ICC Uniform Rules for Demand Guarantees (URDG 758), which explicitly state that a demand guarantee is subject only to its terms, whether expressly stipulated in the guarantee itself or incorporated by refere...

Mitigating Risks in Transferring Banks under Letters of Credit

Introduction: When engaging in international trade, letters of credit (LCs) play a crucial role in ensuring secure and efficient transactions. However, the process of transferring the L/C can expose both the transferring bank and the parties involved to certain risks. Mishandling or errors during the transfer can lead to claims and defenses against the transferring bank. In this article, we will explore the potential risks associated with transferring banks under letters of credit and discuss effective strategies to mitigate these risks. Understanding the Risks: 1. Documentation Errors: Incorrect or incomplete documentation can result in discrepancies that may trigger claims against the transferring bank. These errors can include discrepancies in quantity, quality, pricing, or even incorrect shipping dates. 2. Non-compliance with Terms: Failure to comply with specific terms and conditions outlined in the LC can lead to disputes between parties involved. This could arise from non-c...

Protesting a bill due to non-payment in D/A collection

Protesting a bill due to non-payment in documentary collection can be a necessary step to mitigate the risk of non-payment by the Importer. Under the terms of documentary collection with delivery document against acceptance, there is always a possibility that the transaction may not work out as expected if the Importer fails to pay on the maturity date. In such cases, the Exporter's Bank, also known as the Remitting Bank, can instruct the Importer's Bank, or Collecting Bank, to protest the bill for non-payment or non-acceptance. However, it is important to note that the Collecting Bank is not obligated to follow these instructions. If the Collecting Bank decides to handle the protest instruction, they may issue a bill note. It is crucial to understand that the specifics of this note may vary depending on different jurisdictions. To note a bill, the Collecting Bank typically sends it to a public notary who will then re-present it to the Drawee (Importer) on the same day it was r...

Understanding the Differences between Licenses Issued by OFAC and the Bureau of Industry and Security (BIS)

When it comes to international trade and commerce, various government agencies play a crucial role in regulating and overseeing transactions involving sensitive goods or countries. The Office of Foreign Assets Control (OFAC) and the Bureau of Industry and Security (BIS) are two such agencies within the United States government. This article aims to shed light on the key differences between licenses issued by OFAC and BIS, providing a comprehensive understanding of their respective roles in facilitating lawful trade. 1. Purpose and Scope: The primary distinction between OFAC and BIS lies in their areas of focus. OFAC primarily administers economic sanctions programs, while BIS focuses on export controls. OFAC licenses are typically issued to authorize transactions involving sanctioned countries or individuals, whereas BIS licenses pertain to exports of controlled goods, technologies, or services. 2. Jurisdiction: OFAC operates under the U.S. Department of Treasury, while BIS falls under...

Detention in International Trade: Understanding the Holding or Delay of Goods/Cargo at Ports, Terminals, or Customs Facilities

In the realm of international trade, the smooth flow of goods and cargo is crucial for businesses to meet customer demands and maintain profitability. However, delays and detentions at ports, terminals, or customs facilities can disrupt supply chains, leading to financial losses and strained relationships between trading partners. This article aims to shed light on the concept of detention in international trade and explore its causes, impacts, and potential solutions. Understanding Detention in International Trade Detention refers to the holding or delay of goods or cargo beyond the agreed-upon timeframes at ports, terminals, or customs facilities. It occurs when shipments are unable to proceed due to various reasons such as administrative issues, documentation discrepancies, inspections, security concerns, congestion, labor disputes, or even natural disasters. Causes of Detention 1. Administrative Issues: Delays can occur due to administrative inefficiencies such as incomplete paperw...

Bank Guarantees: Understanding the Charges and Key Considerations

Introduction A bank guarantee is a financial instrument issued by a bank on behalf of a customer (applicant) to a third party (beneficiary). It assures the beneficiary that the applicant will fulfill a specific contractual obligation. If the applicant fails to meet their obligation, the beneficiary can claim payment directly from the issuing bank. Types of Bank Guarantees Bank guarantees are issued for various purposes and can take different forms, including: Performance Guarantees: Ensure the fulfillment of contractual obligations, such as construction contracts or supply agreements. Bid Guarantees: Assure that the applicant will enter into a contract after winning a bid. Advance Payment Guarantees: Protect the beneficiary in case the applicant fails to deliver goods or services after receiving an advance payment. Payment Guarantees: Guarantee the payment of a specific sum to the beneficiary under certain conditions. ...

The Electronic Trade Documents Act 2023: Revolutionizing Key Documents in the UK

Introduction In an era where digitalization is transforming every aspect of our lives, it comes as no surprise that the world of trade and commerce is also undergoing a significant shift. The United Kingdom has taken a bold step towards embracing this change by introducing the Electronic Trade Documents Act 2023. This groundbreaking legislation aims to revolutionize key documents used in trade transactions, such as bills of exchange, promissory notes, bills of lading, ship's delivery orders, warehouse receipts, mate's receipts, marine insurance policies, and certain cargo insurance certificates. In this article, we will delve into the implications and benefits of this act for businesses and the wider economy. 1. Bills of Exchange Traditionally used as a means of payment in international trade transactions, bills of exchange are negotiable instruments that allow for deferred payment. The Electronic Trade Documents Act 2023 enables these documents to be created, signed, transferr...

Trade and Supply Chain View

Search This Blog

Navigating Non-Compliant Demands: A Guide to Corrections Under Demand Guarantees