The economy will grow by 6.9 percent this year, according to projections from the National Bank of Cambodia (NBC), spurred by the robust performance of the tourism, construction and garment sectors.
The figure features in a recent report by the NBC titled Macroeconomic Prospects and Financial Sector in 2017 and Outlook for 2018.
Other international bodies have issued similar forecasts, with the World Bank also placing Cambodia’s growth in 2018 at 6.9, the International Monetary Fund (IMF) projecting 6.8 and the Asian Development Bank saying it will be 7.1.
“Strong regional growth will support investment, exports and tourism,” the report reads.
“Garment exports, meanwhile, will be supported by access to preferential treatment from the European Union (EU) and the US, as well as an increase in exports to Japan and Canada, which will help us reduce our reliance on just a few markets.
“The country has also been diversifying its manufacturing and production, and we are now making electronics and auto parts,” it said.
The reports also says their projections are based on Cambodia’s macroeconomic stability and the fast development of the banking sector, as well as an increase in government’s revenue from tax collection and deep structural reforms in key institutions.
Despite the positive outlook, the report warned that the country will be facing a number of challenges during the year, highlighting the moderate growth of global and regional trade partners like the EU, the US and China, and noting that the upcoming general election will likely drive down investors’ willingness to put their money into the country.
Yong Sarah Zhou, the IMF representative to Cambodia, told Khmer Times that Cambodia has been growing at an impressive rate over the past few years, benefiting from a stable macroeconomic environment and improvements in productivity at the nations’ manufacturing centres.
“Cambodia’s growth prospects are positive. We project economic activity will grow by around 7 percent over the next few years, supported by a favourable global and regional outlook.”
She warned that some investors appear in wait-and-see mode owing to the impending general elections, which will take place this July.
However, construction momentum appears to remain robust and tourism activity has picked up pace, she said.
To mitigate economic and financial risks, the focus for economic policies should be on increasing resilience, especially in the banking system, and on safeguarding fiscal buffers, she suggested.
At the same time, Cambodia needs to accelerate the implementation of structural reforms to further promote export diversification, enhance competitiveness and improve the business climate, the IMF representative said.
“This calls for continued efforts to safeguard macroeconomic and financial stability and reforms to stimulate diversification, in terms of both export products and export destinations, and to improve governance and the business climate.
“Reforms remain crucial for Cambodia to achieve a strong, sustainable and inclusive growth.”
According to the NBC’s report Cambodia’s economy may be facing other external risks in 2018, including uncertainty surrounding US policy in trade and the effects of Brexit on the EU’s economy.
Additional internal risks are the rise in wages for garment workers, which the report says will affect export competiveness, as well as a lack of external markets to sell Cambodia’s agricultural products.
According to IMF numbers, world growth in 2018 will reach 3.7 percent. Growth in Asia will be 5.5 percent, with China experiencing a slowdown, moving from 6.8 percent growth last year to 6.5 in 2018.
This article was originally published in the Khmer Times.