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ASEAN economies affected by slowdown

IMF chief economist Olivier Blanchard speaks at the IMF’s annual meeting in Tokyo yesterday, Tuesday, Oct. 9, 2012, watched by adviser Thomas Helbing. Photograph: May Kunmakara/Phnom Penh Post

The IMF World Economic Outlook (WEO) forecasts that uncertainty surrounding growth in advanced economies will slightly affect the growth of some ASEAN nations, particularly low-income countries such as Cambodia.

A senior IMF official told reporters on the sidelines of the fund’s annual meeting yesterday that some ASEAN economies relying heavily on exports to Europe and the US would be affected by the global economic slowdown.

“If you look at the ASEAN countries, there have not been  many revisions to our forecast; they are not like the big economies, China and India. These economies have suffered the effects of the slowdown in the region,” Thomas Helbling, head of world economic studies in the IMF’s research department, said.

“Monetary policy has been relatively easy. Investment spending has accelerated, so there has been a shift towards domestic demand that has allowed for quite robust rates of growth for the region.”

According to the WEO, world growth projections have been revised to 3.3 per cent and 3.6 per cent in 2012 and 2013 respectively, lower than the estimates in July.

US growth projections were decreased to 3.3 per cent and 3.6 per cent in 2012 and 2013 relatively, a drop of 0.2 and 0.3 per cent from July’s forecast.

European growth was revised to 0.1 and 0.8 per cent in 2012 and 2013 respectively. China’s growth projections also declined, to 7.8 per cent in 2012 and 8.2 per cent in 2013 —  a 0.2 per cent drop for both years.

Late last week, the IMF raised its projection for Cambodia‘s GDP growth to 6.5 per cent in 2012.

In the medium term, Cambodia’s growth rate could reach 7.5 per cent, provided there was continued improvement in the business climate, infrastructure and public service delivery, it said.

Inflation, after decelerating in mid-year, is projected to average 3.5 per cent in 2012 and four per cent in 2013.

The current-account deficit is projected to peak at 10 per cent of GDP in 2012, partly because of moderating exports and investment-related imports, but remains fully financed through foreign investment and official loans.

“Despite Cambodia’s favourable growth outlook and recent export performance, spillover risks from the still-uncertain global recovery remain considerable,” Olaf Unteroberdoerster, senior economist in the IMF’s Asia Pacific department, said.

“Potential downside risks in Cambodia could be a complicating factor, stemming mainly from potential labour-market instabilities, extreme weather conditions and rapid credit expansion affecting banks’ health,” he said.

“On the other hand, upside risks from improving the power sector and rural infrastructure, and increasingly diversified Foreign Direct Investment (FDI) amid positive spillovers from Asia’s rebalancing, could provide a stronger-than-expected boost to Cambodia’s growth.”

Helbling said low-income countries still faced challenges, requiring policymakers to set clear goals that strengthened their economies.

“One of the key things is building the policy framework. Another issue in low-income countries is high commodities prices.

For this, the key is better managed subsidies moving from general subsidy to targeted subsidy, and setting up an effective social safety net to help the poor,” he said.

To contact the reporter on this story: May Kunmakara at



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