Cambodia: World Bank predicts GDP growth easing

• Apr 19, 2017

The World Bank has predicted that Cambodia’s GDP will grow at a more modest 6.9 percent this year and next, and slow slightly to 6.7 percent in 2019. 

However, its prediction is lower than the Asian Development Bank’s flagship annual economic publication, Asian Development Outlook 2017, which forecast Cambodian GDP to grow by 7.1 percent in 2017 and 2018. 

The bank’s East Asia and Pacific Economic Update for this month says the moderate growth is partly buoyed by rising government spending. 

Signs of moderation, in particular in the construction and garment sectors, are emerging while a gradual expansion of the agriculture sector is anticipated, thanks to concerted efforts by all stakeholders. 

Meanwhile, modest improvements may be seen in tourism, supported in part by newly established direct flights and a number of new initiatives to boost arrivals such as “China Ready”. 

The report added that garment export growth has moderated to 8.4 percent in value terms year-on-year, compared with 12.3 percent in 2015. 

Soaring costs, driven in part by rising costs of living, US dollar appreciation and competition from other regional low-wage countries, in particular Myanmar, continue to exert downward pressures on garment exports. 

Better weather resulted in improved agricultural production, while tourist arrivals eased further. Rainy season rice production expanded to 7.3 million metric tons in 2016 or an 8.9 percent increase. However agricultural exports were depressed, the report said. 

It added that due to the limited success in diversification of tourist attraction sites beyond the Angkor Wat complex, international arrivals were five percent year-on-year growth in 2016, compared with 6.1 percent in 2015. 

It added that in the medium term, the growth outlook remains favorable, underpinned by regional integration.

Rural household diversification into sources of income such as garments, services, and remittances could be a significant contributor to poverty reduction and shared prosperity. 

Risks included fallout from a rise in US interest rates and uncertainty in global trade, the report said. 

Inguna Dobraja, World Bank country manager for Cambodia said GDP growth is expected to remain strong with higher public spending and the expansion of agriculture and tourism offsetting moderation in construction and garments. 

“It is encouraging to see that Cambodia’s economic growth will continue to be strong in the next few years,” she said.

The report suggests that to improve growth prospects, it is important to boost capital investment which has been shrinking. 

It said enhancing public investment management is a prerequisite to ensure spending efficiency while boosting investments in pro-growth and pro-poor sectors, such as physical infrastructure, irrigation, education and health. 

In the short run it would be important to promoting vocational and technological skills, while reducing energy costs to attract and compete in high value-added and more sophisticated manufacturing. 

In the Asian Development Bank annual economic publication, Asian Development Outlook 2017, released recently, Cambodia’s gross domestic product is expected to increase by 7.1 percent in 2017 and 2018, slightly higher than the estimate of 7.0 percent last year. 

The report says the economy is expected to remain strong over the next two years, driven by solid garment and footwear exports, construction and real estate activities, rising government expenditure and a moderate recovery in agricultural production. 

ADB country director Samiuela Tukuafu said inflation is predicted to edge up and the current account deficit to narrow. Reviving agriculture is critical to sustaining rapid growth and poverty reduction.

He said that growth in industry is projected at 10.8 percent this year, supported by higher growth in major industrial countries and some diversification into products with high value-added such as garments, footwear, light manufacturing and electronics.

Source: http://www.khmertimeskh.com/news/37549/world-bank-predicts-gdp-growth-easing/