Rising private sector credit growth, property inflation dangers for Cambodia: S&P

SINGAPORE - S&P Global Ratings is continuing to clasify the banking sector of Cambodia in group '9' under its Banking Industry Country Risk Assessment (BICRA), along with Argentina, Azerbaijan, Kenya, Papua New Guinea, Tunisia, Mongolia and Vietnam.

The ratings agency says economic risk for Cambodia's banking sector remains high by global standards, reflecting the country's low income level, underdeveloped economy, and constraints on monetary and fiscal flexibility.

“We expect credit risk in the economy to remain extremely high owing to relaxed underwriting standards and a very weak payment culture, especially in the context of high credit growth and elevated property prices,” S&P says.

“However, we believe Cambodia's stable GDP growth and renewed reform push should temper economic risks facing banks in the country.

“Cambodia's economic risk trend is negative, reflecting our view that there is a one-in-three chance that rapid private sector credit growth and rapid real estate price inflation could continue over the next one year.

“In our view, this scenario would heighten the economic risks faced by the banks operating in Cambodia.  www.standardandpoors.com (ATI).