ADB: Cambodia’s Economic Growth Continues to Be Healthy

The Asian Development Bank (ADB)'s Asian Development Outlook (ADO) 2018 said the Cambodian economic growth this year and next year are better.

Cambodia's economy is expected to grow at 7 percent in 2018 and 2019, bolstered by solid global economic growth, according to ADB's flagship annual economic publication, Asian Development Outlook (ADO) 2018, released today.

Cambodia's strong economic growth in the near term is supported by robust exports, as well as higher foreign direct investment inflows, tourism activities, and domestic demand. However, rising wages, difficulty in doing business, and intensifying competition can undermine the country's competitiveness, said Jan Hansen, ADB's Senior Country Economist. Policies to support ease of doing business will boost entrepreneurship, deepen the integration of local businesses in the manufacturing sector, and create more and better jobs.

Cambodia's industrial output is likely to continue to grow by 9.6 percent this year, with a slowdown in the garments and footwear industries offset by stronger growth in emerging industries, such as electrical parts, automobile components, bicycles, milled rice, and rubber, according to the report. Growth in services is expected to remain robust at 7.1 percent this year, supported by solid numbers of tourist arrivals. Assuming favourable weather conditions, Cambodia's agriculture is expected to growth at 1.8 percent in 2018.

Fiscal policy is expected to be more expansionary this year than in 2017, with continuing revenue growth more than offset by higher spending and the fiscal deficit target rising to 5.1 percent of gross domestic product (GDP). The current account deficit (excluding official transfers) is seen widening this year as costs for oil and other imported products rise in a fast-growing economy. Higher investment inflows and official loans from abroad will likely cover the current account deficit and build up gross foreign reserves to about US$10 billion by the end of 2018, providing 6.1 months of import cover.

The economic outlook is subject to downside risks, heightened by the vulnerability of Cambodia's financial sector to global financial volatility traceable to an almost doubling bank credit-to-GDP ratio over the past 5 years to 76 percent last year. While recently introduced credit risk and capital buffer regulations have helped push down the bank credit growth to 15 percent by the end of last year, credit related to the real estate sector is growing much faster.

Source: Agency Kampuchea Press