The Asia Development Bank has revised its growth expectations for the entire region down to 6.1 per cent for 2012 in an update to its annual development outlook released in April.
This revision comes after the IMF increased GDP projections for Cambodia to up to 7 per cent in 2012 on Tuesday.
The ADB’s projections for Cambodia in April were in line with the IMF’s new expectations, but the update decreased it to 6.4 per cent, according to ADB’s senior country economist for Cambodia, Peter Brimble.
Yesterday’s ADB statement said the slump in global markets has lessened demand for Cambodian products leading to the decreased growth forecasts.
“Falling global demand, especially in Europe and the US, means that the industry sector will grow at a slower pace,” said Brimble.
In their update, the ADB said the expansion of the service sector was a key to growth in Asia.
According to Brimble, in Cambodia the services sector will remain buoyant, particularly in terms of tourism and this will offset the slowdown in garment exports.
“In 2012, Cambodia’s service sectors, accounting for almost 40 per cent of GDP, are performing well, including transport, finance and tourism,” said Brimble.
The ADB’s update said major bottlenecks for developing the services sector are lack of human capital, restrictive regulations and inadequate infrastructure.
According to a 2012 policy brief from the Cambodian Development Research Institute, “with development partners’ support, the government has spent the last decade bringing itself into alignment with other countries in the region, both in terms of policy reforms and upgrading physical infrastructure.”
According to the same policy brief, Cambodia’s services sector has increased by 5 per cent of GDP in 2011 and is expected to grow by 5.7 per cent in 2012 due to increased tourism to the country.
However, the brief said there is an over reliance on the garment exports and recommends diversifying the economy into new areas to counter this.
Within the services sector, the brief recommended movement from cultural to beach and eco tourism.
To contact the reporter on this story: Erika Mudie at email@example.com