PHNOM PENH: Ratings agency Moody's on Friday kept Cambodia's credit rating at B2 with a stable outlook, saying its robust GDP growth prospects, macroeconomic stability and efforts to strengthen government revenue helped bolster its "continuing high-debt affordability".
Cambodia's economic growth should stay around 7% this year and in 2019, supported by solid consumption, foreign direct investment (FDI) inflows and exports, the ratings agency said, but warned that the country was vulnerable to negative shocks because of the high dollarisation of loans and deposits.
It added that political developments could hit foreign investment.
"Cambodia's high dollarisation of loans and deposits leaves the sovereign credit profile vulnerable to negative shocks, which could stem from a potential sharp appreciation of the US dollar and spikes in US and domestic interest rates in 2018 and 2019," the ratings agency said on Friday.
Moody's said strong revenue generation gives the government room to raise spending on infrastructure, education and wages and slightly widen fiscal deficits.
However, the agency warned that Cambodia's credit strengths were overshadowed by other risks such as low incomes and a contentious political environment.
"The narrow economic base and low incomes weigh on the shock absorption capacity of the economy. And, political developments have the potential to slow impetus for institutional reform and weigh on FDI inflows... in the lead-up to and after the 2018 general election."
Cambodia is preparing for a July general election that veteran Prime Minister Hun Sen is widely expected to win, with the main opposition party being banned and its leaders lumbered with legal cases that have blocked them from politics.
Some Western nations say the vote will not be free after last year's dissolution of the opposition Cambodia National Rescue Party (CNRP).
Rights groups have accused the government of intimidating its opponents. Earlier this year, the United States said it would curb military support and other aid programmes due to "recent setbacks" in the country's democracy.