Next year’s economic rebound from the effects of the Coronavirus pandemic will be uneven across the region according to Moody’s Investors Service. The world’s biggest credit ratings agency says the ability to manage high debt, adapt to climate change and deal with growing political and social risks will define the shape and pace of the rebound.
“Economic activity will return to pre-pandemic levels for most, but growth rates will be lower than 2021. Higher commodity prices will boost commodity-dependent countries and companies but travel and tourism dependent issuers will take longer to restore profits and sales,” Moody’s said.
That could spell trouble for Cambodia, which depends heavily on the tourist dollar.
In 2019 before the pandemic hit the Kingdom 6.61 million tourists visited, generating $5.31 billion and making up nearly one fifth of the country’s gross national product, according to the World Tourism Organization. The country is slowly reopening its doors but risks losing out to neighbours such as Thailand, which started allowing fully vaccinated tourists from 63 countries to enter starting this month. While the Kingdom has cut quarantine to seven days for most arrivals and launched a five-day sandbox scheme in Sihanoukville, Koh Rong and Dara Sakor from the end of this month, it won’t feel the full benefits of a tourism revival until it drops quarantine and allows more countries to resume direct flights.
Cambodia has the highest vaccination rate in Asia and one of the highest in the world, according to ourworldindata.org, and Prime Minister Hun Sen declared the country is back to business at the start of the month. However, Moody’s warns the rest of the region is not in such a strong position to fully reopen.
“APAC growth will recover to pre-pandemic levels, although there will be a degree of scarring.” Moody’s said. “Many recoveries are vulnerable to resurgences in the virus, with vaccination rates still low in many parts of the region. Governments are adjusting their responses to the disease to keep larger parts of their economies open, while minimizing virus transmission. This is resulting in uneven recoveries across the region.”
Moody’s points to Thailand and the Philippines, where it says businesses will recover more slowly than elsewhere in the region even though economic conditions will be better than last year.
The credit ratings company warns of the risk of rising bad loans at small and medium-sized enterprises (SMEs). This could prove true in Cambodia where a moratorium on loan repayments ends on December 31, which means the Kingdom’s SMEs may struggle to keep pace with repayments.
Moody’s points to the migration to a digital economy as a potential upside for growth, particularly in the financial sector.
“Banks will continue to expand through digital and mobile financial services, which have gained significant traction in the past year because of social distancing measures,” Moody’s said. “Banks will partner with fintech companies to develop digital ecosystems.”
Cambodia is ahead of the curve when it comes to Industry 4.0 in some respects, with the central bank’s Bakong digital payment app and the government’s online tax and business registration services. However, the tech startup landscape is still bleak compared with the likes of Singapore and Indonesia, due to a shortage of qualified mentors and limited access to financing options.
This article was first published in Khmer Times. All contents and images are copyright to their respective owners and sources.