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Cambodia expected to gain from China rebound, says economist
Cambodia is expected to benefit from a rebound in China in 2023, an economist told Khmer Times yesterday.
According to the World Bank’s Cambodia Economic Update: Post-Covid-19 Economic Recovery, Cambodia’s economic recovery solidified in 2022, when real growth accelerated to 5.2 percent.
Reiterating the view of the World Bank, Oudom Cheng, an economist at National Bank of Cambodia, speaking in his personal capacity, said: “A rebound in China could boost tourism receipts, exports, and FDI inflows to Cambodia, partly offsetting slower demand from advanced economies this year.”
The reopening of Cambodia and China is expected to boost the Kingdom’s economy through improved mobility and tourism, Oudom told Khmer Times, adding that this will lead to increased tourism revenue, domestic consumption, and local trade, which will help reduce Cambodia’s current account deficit.
“In addition, inflation is expected to continue moderating which would help support consumption and investment decisions as well. FDIs and aid flows are anticipated to continue increasing which supports Cambodia’s economy and contributes to maintaining the robustness of Cambodia’s Foreign Exchange reserves at around seven months of imports, a level higher than the regional benchmark of three months,” the economist said.
On the downside, there are concerns that slower demand in the United States and Europe could reduce garment and footwear exports from Cambodia, he pointed out.
However, the current account deficit is expected to shrink further as tourism receipts increase and gold and merchandise imports could slowdown. This will reduce risks to the external sector of Cambodia. Additionally, the growth in construction and agriculture is expected to improve incrementally in 2023, Oudom observed.
According to World Bank, a strong rebound in services, especially trade, travel, and hospitality has helped bring Cambodia back to pre-Covid-19 growth levels, with foreign arrivals accelerating due to the Southeast Asian Games and ASEAN Para Games. This revival is also boosted by easing domestic prices as global oil and food prices stabilize.
“With the agriculture sector expanding due to improved access to regional markets following newly ratified trade agreements, economic growth is forecast to accelerate to 5.5 percent in 2023. However, an extended slowdown in external demand could weaken export-oriented manufacturing, while continued global financial tightening might expose risks in Cambodia’s highly leveraged financial sector,” the World Bank added.
Pointing out the possible negative spillover from a more tightening global financial conditions on Cambodia, Oudom said: “Further increase in interest rates could likely put a burden on clients of banking institutions in terms of debt servicing when it reaches a critical point of their income. At a higher level, this trend would reduce consumption and investment (both expansion plan and new plan) in the economy. The reduction in both consumption and investment would also affect the fiscal revenue as economic activities shrink. The impact on both the private and public sector spending could eventually reduce economic growth.”
While the economy is expected to remain robust through 2023 and the financial sector remains resilient, sharper-than-expected global financial tightening and the global economic slowdown could affect the momentum of growth in Cambodia with some lag periods. Therefore, both growth-supporting and risks prevention policies should be prepared pre-emptively, the economist added.
Source: https://www.khmertimeskh.com/501316559/cambodia-expected-to-gain-from-china-rebound-says-economist/