Cambodia: 2024 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Cambodia

2024ARTICLE IV CONSULTATION—PRESS RELEASE;STAFF REPORT;AND STATEMENT BY THE EXECUTIVEDIRECTOR FORCAMBODIA Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussionswith members, usually every year. In the context of the2024Article IV consultation withCambodia, the following documents have been released and are included inthis package: •APress Releasesummarizing the views of the Executive Board as expressed during itsJanuary 10, 2025,consideration of the staff report that concluded the Article IVconsultation withCambodia. •The Staff Reportprepared by a staff team of the IMF for the Executive Board’sconsideration onJanuary 10, 2025, following discussions that ended onSeptember 30,2024,with the officials ofCambodiaon economic developments and policies. Basedon information available at the time of these discussions, the staff report wascompleted onNovember 22, 2024. •AnInformational Annexprepared by the IMFstaff. •ADebt Sustainability Analysisprepared by thestaffs of theIMFand the World Bank. •AStatement by theExecutive DirectorforCambodia. TheIMF’s transparency policy allows for the deletion of market-sensitive information andpremature disclosure of the authorities’ policy intentions in published staff reports andother documents. Copies of this report are available to the public from International Monetary Fund•Publication ServicesPO Box 92780•Washington, D.C. 20090Telephone: (202) 623-7430•Fax: (202) 623-7201E-mail:publications@imf.org Web:http://www.imf.orgPrice: $18.00per printed copy International Monetary FundWashington, D.C. IMF Executive Board Concludes 2024 Article IV Consultation withCambodia FOR IMMEDIATE RELEASE Washington, DC – January 27, 2025:The Executive Board of the International Monetary Fund(IMF) concluded the Article IV consultation1with Cambodia. Cambodia’s economy has continued to recover, albeit at a modest pace. We project real GDP togrow from 5.5 percent in 2024 to 5.8 percent in 2025 and inflation to pick up from 0.5 percent in2024 to 2 percent in 2025 and remain contained. However, risks to the outlook are tilted to thedownside from both external factors and domestic vulnerabilities, including from policy changesby major trading partners, geoeconomic fragmentation, and continued weakness in theconstruction and real estate sectors. The recovery remains uneven. Real GDP growth is driven mainly by external demand, with astrong rebound in garment exports and high growth in agricultural exports. Tourism hasexperienced a structural shift in its composition, resulting in a lagged recovery in tourismreceipts. Growth in non-tradable sectors remains weak. After a sustained credit expansion thatlifted the credit-to-GDP ratio from 24 percent in 2010 to 135 percent in 2023, credit growth hascome to a near halt. The construction and real estate sectors are undergoing a correction, withrising non-performing loans and emerging signs of private-sector debt overhang. We project the fiscal deficit at 2.4 percent of GDP in 2025, down from 3 percent in 2024, with agradual fiscal consolidation envisaged in the medium-term fiscal framework. Public debt remainswell-contained, staying below 30 percent of GDP over the next decade. The current accountbalance is projected to swing back to a deficit of 1.8 percent of GDP in 2024 as strong demandfor imports outpaces the recovery in exports and tourism. The deficit is projected to increasesomewhat in 2025, reaching 2.5 percent of GDP, with export growth expected to moderate. Executive Board Assessment2 Executive Directors welcomed the continuing recovery of the Cambodian economy, driven bystrong growth in garment and agricultural exports, and improving tourism activity. Nonetheless,the recovery has been uneven, and while growth is expected to continue, risks to the outlook aretilted to the downside. Directors underscored the importance of policies to safeguard macrofinancial stability, ensure a durable and inclusive recovery, and achieve the authorities’development goals over the medium term. Directors supported a neutral fiscal stance in the near term and highlighted theimportance of gradual and high-quality consolidation over the medium term underpinned bysound fiscal frameworks to maintain debt sustainability and strengthen economic resilience.They welcomed the recent publication of a medium-term fiscal framework but recommendedstrengthening it with more conservative and transparent fiscal rules. Directors stressed theneed to further mobilize revenues through rationalizing tax exemptions and implementing taxpolicy reforms, while enhancing spending efficiency and strengthening public investmentmanagement, in order to help rebuild fiscal buffers and safeguard priority social and capitalspending. Directors welcomed efforts to foster the development of the domestic governmentbond market as Cambodia’s access to concessional foreign financing will be reduced when itgraduates from Least Developed Country status. They al