The International Monetary Fund (IMF) expects Cambodia to be among the best-performing economies in East Asia and the Pacific this year aside Philippines and Vietnam.
In its annual World Economic Outlook released in Washington, IMF said the Philippine economy was forecast to expand 6.0 percent – the fastest pace among the 15 members of the Regional Comprehensive Economic Partnership (RCEP) agreement.
Cambodia ranked equal second with Vietnam, with both economies projected to grow 5.8 percent.
Other projections were 5.2 percent for China, 5.0 percent for Indonesia, 4.5 percent for Malaysia, 4.0 percent for Laos, 3.4 percent for Thailand, 3.3 percent for Brunei, 2.6 percent for Myanmar, 1.6 percent for Australia, 1.5 percent for both South Korea and Singapore, 1.3 percent for Japan and 1.1 percent for New Zealand.
For the overall world economy, IMF projected growth at 2.8 percent this year – 0.1 percentage point below the January update to its projection in October last year.
“On the surface, the global economy appears poised for a gradual recovery from the powerful blows of the pandemic and of Russia’s unprovoked war on Ukraine,” the outlook said.
“China is rebounding strongly following the reopening of its economy. Supply-chain disruptions are unwinding, while the dislocations to energy and food markets caused by the war are receding.”
At the same time, “the massive and synchronous tightening of monetary policy by most central banks should start to bear fruit, with inflation moving back toward its targets,” it added.
“Below the surface, however, turbulence is building, and the situation is quite fragile, as the recent bout of banking instability reminded us.”
IMF economic consultant Pierre-Olivier Gourinchas said downside risks dominated the world outlook.
He further added that the world was now entering a “tricky phase” with historically lackluster growth, greater financial risks and persistent inflation.
Following the takeover of ailing Credit Suisse by rival Swiss bank UBS last month, the outlook recalled that “nervous investors often look for the next weakest link.”
Weak links include financial institutions with too much leverage, credit risk, exposure to interest rates, or dependence on short-term funding. Others include jurisdictions with limited fiscal space or weaker perceived fundamentals.
“A sharp tightening of global financial conditions – a ‘risk-off’ shock – could have a dramatic impact on credit conditions and public finances especially in emerging market and developing economies, with large capital outflows, a sudden increase in risk premia, a dollar. appreciation in a rush toward safety, and major declines in global activity amid lower confidence, household spending, and investment.”
“As such a severe downside scenario, global GDP per capita could come close to falling — an outcome whose probability we estimate at about 15 percent,” the outlook said.
“We are therefore entering a perilous phase during which economic growth remains low by historical standards and financial risks have risen, yet inflation has not yet decisively turned the corner.”
The IMF’s latest projections also show an overall slowdown in medium-term growth forecasts.
Growth projections five years ahead have declined steadily from 4.6 percent in 2011 to 3 percent in 2023.
“Some of this decline reflects the growth slowdown of previous rapidly growing economies such as China or Korea. This is predictable: growth slows down as countries converge.”
“But some of the recent slowdown may also reflect more ominous forces,” the outlook warned.
These include pandemic scarring, slower structural reform – and the “rising and increasingly real threat” of geo-economic fragmentation.
A world splintered into economic blocs would lead to more trade tensions, less direct investment and slower innovation and technology adoption across fragmented blocs.
“A fragmented world is unlikely to achieve progress for all, or to successfully tackle global challenges such as climate change or pandemic preparedness,” the IMF said.
The IMF outlook models what might happen to foreign direct investment in a hypothetical tripolar world comprising a US bloc of advanced economies, a China bloc including most of Southeast Asia and a third group of non-aligned economies including India and Indonesia.
But the IMF stresses that the geopolitical coalitions modeled are for “analytical purposes only and are not intended to indicate alignment choices countries are likely to make.”