Banks among Asean countries need to inject $300 million into the economy to help stimulate trade and facilitate the region’s emergence from the current economic downturn, the permanent committee on cooperation in finance, investment and trade to the Asean Banking Council announced Friday at a regional meeting in Phnom Penh.
“Up to $300 million is recommended to support intra-Asean trade that is being impacted by the current global financial crisis and the rising risk associated with trade,” the Asean Banking Council said at the close of the meeting.
According to the statement, the economies of Asean nations are expected to remain weak in the coming quarters as the availability of financing for companies to trade is still limited.
“The collapse of major financial institutions in the West has created much uncertainty resulting in a sudden contraction of credit appetite amongst the banks,” the statement said. “The general scarcity of capital coupled with the higher cost of fundings have also resulted in liquidity premium on all lending and heightened risk perception.”
Steven Higgins, CEO of ANZ Royal Bank in Phnom Penh, said that lending activities here would remain weak for the remainder of this year.
“But the possibility of that happening two years in a row in an emerging economy like Cambodia is very unlikely,” he said.
Next year, he added, “I would expect across the board increase in lending. With property prices returning to more sensible levels you’re likely to see more mortgage lending.”
Nonetheless, Mr Higgins said that much will depend on confidence levels as to how quick a rebound in lending activity takes place.
Speaking at Friday’s meeting, Deputy Governor of the National Bank of Cambodia Neav Chanthana said that the Cambodian banking sector had experienced a severe slowdown in both lending and deposit growth, with the agricultural sector the only area of the economy expected to experience any growth in the near future.
“Due to risks involved for public and for financial stability, there is a constant need to strike the appropriate balance among prudential consideration, market developments and business opportunities in a world where globalization and innovation represent severe challenges,” she said.