Fiscal stimulus, high vaccination rates fuel Cambodia’s economic growth — outlook report

Strong fiscal stimulus and high vaccination rates have helped quickened Cambodia’s economic recovery in the post-COVID-19 pandemic era, an ASEAN+3 Macroeconomic Research Office (AMRO) report said on Thursday.

In its Cambodia Economic Outlook 2022, the AMRO said the Cambodian economy has been resilient, adding that the lifting of COVID-19 restrictions boosted domestic activity while strong external demand supported the economic recovery in the first half of 2022.

“The Cambodian economy is projected to grow by 5 percent in 2022, up from 3 percent in 2021,” AMRO deputy group head and senior economist Jinho Choi said in a news release.

“We expect the domestic economy to continue to improve, supported by high vaccination rates and enhanced health protocols,” he said.

“However, the outlook for exports will be challenging as the United States and the European Union are expected to slow down sharply in the second half of this year, which could weigh heavily on the garment sector,” Choi added.

The report said Cambodia’s new investment law, and the greater market access through the Regional Comprehensive Economic Partnership (RCEP) free trade pact and the Cambodia-China Free Trade Agreement (CCFTA) will provide a strong boost to investments that will help modernize and diversify the kingdom’s economy.

It also highlighted some downside risks to Cambodia’s growth, including a slowing global demand amid the Russia-Ukraine conflict and monetary tightening in the United States and Europe.

According to the report, Cambodia’s inflation was forecast to rise to 5.9 percent in 2022, up from 2.9 percent last year, fuelled by soaring global energy and food prices.

Cambodia has so far administered COVID-19 vaccines to 15.14 million people, or 94.6 percent of its 16 million population, and China’s Sinovac and Sinopharm vaccines have been widely used in the kingdom’s immunization programs.

Cambodian Ministry of Commerce’s undersecretary of state and spokesperson Penn Sovicheat said high vaccination rates, the RCEP, and the CCFTA are the key factors of boosting the country’s post-pandemic economic growth.

“Under the RCEP and the CCFTA, which both took effect earlier this year, we are confident that Cambodia’s exports to China and other RCEP participating countries will be bigger, especially the exports of potential agricultural products such as rice, bananas and mangoes, industrial products, and processing goods,” he told Xinhua.

The RCEP comprises 15 Asia-Pacific countries including 10 ASEAN (Association of Southeast Asian Nations) member states — Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam — and their five trading partners, namely China, Japan, South Korea, Australia and New Zealand.

Ky Sereyvath, a senior economist and director general of the Institute of China Studies at the Royal Academy of Cambodia, agreed that fiscal stimulus, high vaccination rates and free tree agreements are the boosters for Cambodia’s economic growth.

“Chinese COVID-19 vaccines have not only protected millions of Cambodian people’s lives and stabilized the health system, but also helped boost Cambodia’s economic recovery,” he told Xinhua.