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WORLD BANK PREDICTS CAMBODIA'S ECONOMIC GROWTH FOR 2022 AND 2023
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The World Bank forecasts in recent report that Cambodia economy will return to positive growth in 2022 at 4.5% and 5.5% in 2023.
Compared to other ASEAN countries, Cambodia will grow faster than Thailand, which World Bank has projected to grow by 2.9% in 2022.
According to World Bank report, Cambodia’s economic growth is projected at 4.5% this year due to the opening up, socio-economic recovery, ultra-high vaccination rates, and lifting of the travel bans for domestic and foreign travelers.
In addition, Cambodia’s exports of garments and agriculture are still growing, while tourism sector also reopening.
Return to strong economic growth
Dr. Ky Sereyvath an economist and chairman of the Chinese Studies Center at Royal Academy of Cambodia, told Cambodia Investment Review that Cambodia remains one of the countries in the region with ample opportunity to boost its economic growth in 2022.
He added that this year, Cambodia economy may have a lot of positive effects because at the beginning of this year, the momentum of foreign investors came back and the volume of exports of Cambodian goods to international markets remain high, especially trade in agriculture, garments, footwear and travel goods.
“We do not think Cambodia economy will suffer again because Cambodia’s social process has moved forward with the new mechanisms that government has put in place,” he said.
“But what worries us is the prolongation of the Russia-Ukraine invasion. This war crisis may cause the price of goods to increase, especially it can further disrupt the process of exporting Cambodian goods to international markets,” he added.
According to the economist, the disruption of Cambodia’s exports to international markets due to declining global demand and rising shipping costs.
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At this level, the Cambodian government is referring to the resumption of normal visits to the country, as well as references to several economic sectors, such as industry, services and especially agriculture. The agricultural sector, which the government claims is less affected by Covid-19 crisis.
Trade agreements with major countries can boost Cambodia’s economy
World Bank has expressed expectations that in the mid term, Cambodia economy is likely to return to its high potential of 6% growth.
In particular, under the new investment law, a free trade agreement between Cambodia-China (CCFTA) and Cambodia-South Korea (CKFTA) and a regional comprehensive economic partnership (RCEP), Cambodia will be able to attract more foreign investors to invest and trade in the coming years. And on the positive side, Cambodia will be better resilient to the global crisis.
Penn Sovicheat, a spokesman for the Ministry of Commerce, told the source that Cambodia now has export markets and trade with many of the world’s major countries. Those major countries include the United States, the European Union, China, Canada, Korea and Japan.
He further add-on that in next five years, Ministry of Commerce will strengthen existing products and promote the diversification of new products to meet market demand, while the current market in the region with high expectations is especially the market of China and its trading partners under the RCEP agreement and the Cambodia-China Free Trade Agreement.
He said that to ensure sustainable economic growth, we have continued to cooperate with partner countries to promote more exports of Cambodia products and duty-free. The capture of international market is an important catalyst for Cambodia’s growth, especially to achieve 7% growth again.
Ministry of Commerce is ready to increase the productivity of companies and workers, encourage more domestic investment, especially the expansion of export diversification. Diversification of exports by investing in human resources, improving the capacity of market institutions, as well as improving public investment management.
Impacts that Cambodia may face in the future
Although the forecast for Cambodia’s economic growth in 2022 seems to be good image. However, World Bank said that Cambodia’s manufacturing exports in the coming months could face heavy rainstorms. Difficult due to declining demand from the United States and the slowdown of general structural in China.
In particular, rising energy and commodity prices caused by the war in Ukraine will also hinder Cambodia’s poverty reduction mechanism, as Cambodia can reduce the country’s poverty rate by 1.6% per year and also this issue places an additional burden on the costs of the entire population.
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The World Bank commented that commodity and energy prices were also pushing up inflationary pressures in Cambodia. While inflation in Cambodia in January continued to surge to around 4.1%, while inflation is generally around 3%. However, with the support of the National Bank of Cambodia for open market operations, the exchange rate continues to stabilize at KHR 4,100 per dollar.
It also stated that economic growth of 4.5% in 2022 may also be at risk if the pandemic continues to spread again. For the economy to recover, Cambodia needs to reform a number of key areas, including the introduction of clear rules and regulations for learning to live with Covid-19.
According to the “new normalization path”, regulatory and fiscal measures to help revive the tourism sector, and the immediate introduction of regulations for the implementation of new employment laws.
To tackle this chronic economic crisis, World Bank urges Cambodia to take concrete steps to strengthen external competition, as well as boost manufacturing and exports, especially to take advantage of new investment laws and trade agreements with China and south-Korea.
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