Financial Crimes on the Rise in Cambodia: A Worrying Trend for Economy’s Future

Economic Growth at Risk

Cambodia’s economy has experienced significant growth over the past two decades, with an estimated 5.4 percent growth rate in 2023. However, a worrying trend is emerging that could threaten its future growth. Financial crimes are on the rise in the country, with experts warning of potential consequences for the economy.

Rising Non-Performing Loans and Housing Market Correction

A faster-than-expected increase in non-performing loans has affected macro-financial stability as the housing market correction continues. This has raised concerns over the country’s ability to sustain its economic growth and reach its ambitious goal of becoming an upper-middle-income economy by 2030.

Poverty on the Rise

Despite efforts to scale up social assistance to poor and vulnerable households, launched in June 2020, poverty remains higher than pre-pandemic levels. The World Bank’s Assessment suggests that inflation could increase poverty by 4 percentage points from the national poverty rate of about 18 percent, measured in 2019/20.

Consequences for Household Budgets

The energy and food price hikes caused by the Russian-Ukraine conflict have weighed heavily on household budgets, with experts warning that more needs to be done to address the issue.

Addressing Human Capital Indicators

Human capital indicators lag behind other lower-middle-income countries, with a child born in Cambodia expected to be only 49 percent as productive when grown as she or he could be if she or he enjoyed full quality education, good health, and proper nutrition during childhood.

Key Reforms for Sustained Growth

To address these concerns, key reforms are needed for Cambodia to sustain inclusive growth, foster competitiveness, sustainably manage natural resource wealth, and improve access to and quality of public services. This includes:

• Closing the infrastructure gap
• Fostering entrepreneurship
• Expanding technology use
• Building new skills
• Improving accountability and responsiveness in public institutions

Prioritizing Human Capital for Middle-Income Status

Boosting investments in human capital will be crucial to achieving Cambodia’s ambitious goal of reaching middle-income status by 2030. The government must prioritize education, healthcare, and social protection programs to ensure that all citizens have access to quality services and opportunities for growth and development.