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World Bank says Cambodia’s current account improved in the first half of 2022 as trade deficit narrowed
The World Bank in its report released yesterday said Cambodia’s goods export growth accelerated, surpassing its pre-pandemic growth rate.
In the first 8 months of 2022, merchandise exports surged, growing at 28.6 percent y/y, driven largely by exports of main manufacturing products, namely garment, travel goods, and footwear, which grew at 30.3 percent y/y.
Merchandise imports growth eased, increasing 18.3 percent y/y. This led to a temporary improvement in the trade balance.
However, Cambodia’s terms of trade have worsened since the second quarter of 2022, with the impact of higher oil prices partially offsetting the deceleration in import growth.
Overall, Cambodia’s current account recorded an estimated deficit of 11.2 percent of GDP in the first half of 2022. Rising global energy, fertilizer and food prices prompted a surge in inflation.
Consumer price inflation accelerated to 7.8 percent in June but eased to 4.9 percent in August 2022. The relatively high weight of the transport component of 12 percent of the country’s Consumer Price Index consumption basket exacerbates these negative impacts.
The oil and food price shock has also started to affect agricultural production, as the prices of fertilizer and pesticide have increased.
Rising inflation is particularly harmful to poor households. Cambodia, faced with a budget constraint, will see higher prices leading the poor to reduce consumption and to change their consumption to less expensive and lower-quality goods.
Higher prices may also lead the poor to withdraw children from school. As a consequence, inadequate spending on nutritious food, and withdrawal of children from schooling, can have detrimental long-term effects on human capital, causing losses in worker productivity and welfare, and disparities in income in the future. World Bank