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How to curb economic fallout from Covid-19

As the spread of Covid-19 continues to grip the world, national leaders are designing stimulus packages to stabilise economies and social programmes to mitigate risks. Anthony Galliano, group CEO of renowned accounting and auditing firm, Cambodia Investment Management, sat down with The Post’s May Kunmakara and discussed how to address the economic fallout from the coronavirus pandemic.

What is your general outlook on the Kingdom’s post-Covid-19 recovery?

I am deeply concerned with the general positive sentiment and false optimism that global economies will swiftly rebound, in a V shaped recovery. This presumption is evident in equity markets which have rebounded strongly from initial jitters concerning the alarming economic toll of the virus.

While most countries are gradually reopening their economies the breadth and depth will be limited, and the complete return to normal economic activity may not occur until 2021.


The Kingdom is integrated into the global economy, with key sectors such as tourism, garments and real estate exposed to the health of economies in the US, Europe and Asia. With most countries just creeping out of lockdowns and most airports and borders closed, we can expect a long pathway to recovery in tourism, perhaps in 2022.

Undoubtedly the world will recover and economic activity will return to normal – it just may not happen as quickly as forecast. Thus governments need to prepare for the longer haul. Developed economies are just printing money to keep their economies afloat, emerging economies will not have this luxury due to currency shocks, Cambodia’s dollarisation will underpin less currency exposure.

How will the $2 billion fiscal stimulus provided by the government in March via tax incentives help lower economic risk stemming from the pandemic?

The government’s efforts to date have been very supportive, but unfortunately we live in a global economy and the worldwide recession is now creating the worst numbers we have seen since the great depression. These are expected to be short-term and not a deep and broad, but the Kingdom’s economy will continue to need further stimulus as long as both the garment and tourism sector are debilitated.

Most of the world is under the impression that the global economy will quickly return to a degree of normalcy and that there will be a V shaped recovery – the equity markets are confirming this. While we all hope that this is the case, and most governments are printing money to facilitate this, governments should also have a Plan B, just in case this scenario doesn’t materialise.

How will the government’s tax relief for affected sector mitigate and stabilise the downturn?

The government has implemented tax relief measures for businesses to mitigate the negative financial impact of Covid-19, primarily in support of the hospitality, garment, aviation and educational sectors, while also providing financial support for workers in tourism and garments as well.

While priority support for these industries is sensible, given that they are the most affected, the deterioration in tourism and garments will have a domino effect and spread to other sectors, particularly the real estate, retail, and the financial sectors.

The health of the financial sector needs to be monitored closely, especially if the employment situation weakens further. There is evidence in the market that interest rates are increasing to preserve customer deposits and there is a slow creeping increase of loan restructuring.

Under the circumstances this can be expected and is not presently perilous. The stability of tax revenues in the first quarter provides a welcome cushion for the government to provide further tax relief as the negative economic impact of the virus will spread to other parts of the economy.

What measures should the government take to secure the survival and sustained development of the key sectors?

Public infrastructure spending to spur economic growth and create jobs may be a complimentary to tax relief and stimulus measures. Pre-Covid-19, the Kingdom’s infrastructure was not keeping pace with development, and spending on infrastructure development would be timely during this slowdown.

Encouraging foreign direct investment as the world reopens, providing tax incentives or even holidays, as countries like Singapore do, to newly registered companies will make the Kingdom more attractive to do business in.

Improving costs and timing for grants of licences would encourage more foreign investment. Consumer spending is a key component of the economy and a reduction of value-added tax on retail and reducing taxes on big ticket items like cars may stimulate growth.

Coming into 2020, there was concern of an oversupply in the real estate market, especially in the condominium and housing sectors. Encouraging low interest rate mortgages, through subsidised loans backed by tax breaks for lenders, would stimulate the housing market.

This interview has been edited for length and clarity.

This article was originaly published in The Phnom Penh Post