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Cambodia: Lockdown length could alter growth predictions: ADB
While the lingering lockdown and spillover effects from the recent spate of COVID-19 cases clouds all economic predictions in Cambodia with uncertainty, Asian Development Bank’s (ADB) Cambodian branch believes recovery is on the horizon for the economy this year and next, with annual growth of 4 and 5.5 percent, respectively.
The team discussed Cambodia’s status in ADB’s Asian Development Outlook (ADO) 2021, published yesterday, during a webinar attended by ADB staff and media.
However, much of the data used only extended to the end of March and the lockdown imposed this month may affect predictions if it is extended for too long, ADB’s country economist for Cambodia David Freedman said.
ADB Country Director for Cambodia Sunniya Durrani-Jamal said: “The economy contracted by 3.1 percent in 2020 because of the global Coronavirus disease (COVID-19) pandemic. The government has responded quickly to the recent spike in cases, and we expect the economy to return to growth in 2021. This will help increase household incomes, but not all sectors and regions will benefit equally, so it will be essential to closely monitor household welfare and the need for additional support.”
ADB expects economic recoveries in Cambodia’s trading partners to spur some of the growth, while rebounds in industrial production, manufacturing and agriculture will provide more assistance.
According to the ADO, industrial production is predicted to increase 7.1 percent in 2021 and 7 percent in 2022, because of recoveries in the garment, footwear and travel goods sectors and increased manufacturing of light goods such as electronics and bicycles.
The agriculture sector is expected to grow by 1.3 percent in 2021 and 1.2 percent in 2022 because of “higher crop production after last year’s flood damage, continued growth in aquaculture and rising agriculture exports to the People’s Republic of China”.
Further down the line, Duarrani-Jamal said tourism will likely recover – although not to pre-pandemic levels at the start – but this may take three to four years.
The lifting of travel restrictions will be the ultimate determinant to a tourism recovery timeline, Durrani-Jamal and Freedman agreed.
Freedman said travel bubbles could help, although they’ve been slow to materialise, while Durrani-Jamal said, in the longer term, efforts paid to ensure the tourism sector maintains high-quality and hygienic services will go a long way towards comforting potential tourists.
She also said business tourism may pick up before leisure tourism because special visas permitting entry could be on the cards.
Global vaccination rates will also play a role in how quickly the tourism sector and the wider economy can recover.
ADB expects a slower recovery in the tourism-related services sector, which is expected to increase by 3.3 percent this year and 6.2 percent in 2022.
The ADO reported that a large percentage of households experienced significant losses of income and increased indebtedness during the pandemic but flexible fiscal policies have helped to relieve some of this pressure.
As Freedman noted, the lockdown creates clear short-term issues because many businesses are essentially shut off, but the key determinant will be how quickly these are lifted.
A key tracker used to understand the impact of lockdown is by using mobile data to gauge the population’s movement. Since lockdown, mobility understandably drifted away from all forms of businesses and data showed more people cooping up indoors.
Durrani-Jamal said an uneven domestic recovery between sectors will continue to affect families and businesses and slow down the country’s overall economic recovery.
She added: “Key risks to the outlook include widening community outbreaks of COVID-19, slower than expected growth for Cambodia’s major trading partners such as the US and EU, continued weakness in domestic demand and stress on financial services and banking.”
Source: https://www.khmertimeskh.com/50847837/lockdown-length-could-alter-growth-predictions-adb/