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Logo of Phnom Penh Post newspaper Phnom Penh Post - Government rejects IMF's gloomy economic report

Government rejects IMF's gloomy economic report

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Hun Sen says growth will hit seven percent, despite reports by both the

IMF and the ADB that the global crisis will badly impact the Cambodian

economy

Photo by:
AFP

Prime Minister Hun Sen waves during the Independence  Day celebration Sunday in Phnom Penh. He said he was committed to maintaining economic growth of seven percent. 

GOVERNMENT officials have rebuffed a gloomy economic forecast by the International Monetary Fund, saying the nation's predicted growth slowdown would not be as dire

as the world body suggests.

At the culmination of a two-week mission Friday, the IMF announced that lower foreign investment, as well as runoff effects from the global financial crisis, would push Cambodia's economic growth down to 4.8 percent in 2009, from a previously predicted rate of nine percent.  

But in a prepared speech Sunday for the 55th anniversary of Independence Day and the formation of the Royal Cambodian Armed Forces, Prime Minister Hun Sen said he was confident the government's strong economic record protected it against such a depreciative outlook.

"During the last four years, Cambodia has maintained an economic growth of two digits," he said.

"In the fourth mandate, the government will ensure the  achievement of economic growth of around seven percent a year and pull down the inflation rate to one digit."

Finance Minister Keat Chhon told the Post last week that economic growth would be no lower than 6.5 percent for 2009. Officials from the ministry Sunday were more inclined to accept the forecasted figure, but they claimed it was simply an inevitable consequence of a worldwide decline - one they warned could be much worse.

"This is the indirect impact of a global crisis," said Heng Chuon Naron, secretary general of the Ministry of Economy and Finance.

"There will be a slowing in growth, but five percent growth is higher than the world's most industrialised countries, such as the US and Europe, which are now facing growth as low as 0.5 percent," he said.

"We have not had a real estate crash like Vietnam and other countries, so it is not too bad."

He admitted, however, that a drop in tourism could be a hard blow for the economy.

"Because of the appreciation of the US dollar and higher airfares, it is now a lot more expensive for visitors to come to Cambodia," he said.  

"We will now have to focus on rural infrastructure, such as roads and bridges, to build the foundations for future growth, as well as bringing inflation down."

Gloomy forecast

Tal Nay Im, director general of the National Bank of Cambodia, told the Post Sunday she believed the IMF forecast  was based on assumptions of lower exports, especially to the US and Europe, as well as lower tourist arrivals.

However, she was hopeful that growth would be higher if agricultural yields were strong.

"Right now, we expect that the weather will be good. If there is no drought and enough rain, agricultural production will be high. If yields are high, we expect that economic growth will be higher than the IMF's prediction," she said.

"But if crops are unfavorable, growth could drop to the IMF's forecast."

Uncertain times

Economic observers have questioned the government's optimism, while acknowledging there were still unknowns.

Chan Sophal, president of the Cambodia Economic Association, said Sunday that he was reluctant to side with the government's more optimistic prediction.

"Cambodia's economic growth is now riding on many uncertainties, such as weather and foreign security," he said.

"Tourism is being affected by the dispute over Preah Vihear temple, and as for agriculture, we hope there is enough rain, otherwise rice production will have low yields."

Warnings misleading

Kang Chandararot, president of the Cambodia Institute of Development Study, said IMF and World Bank predictions for the Cambodian economy are misleading, as the international bodies were not familiar with the nation's financial nuances.

"I think the prediction by the government is more realistic than IMF forecasts because the government figures are based on practical statistics from the Ministry of Planning," said Kang Chandararot.

He added that economic growth would slow considerably next year due to weaker core export sectors, such as garments, which rely on demand from the US.

Lower exports would also reduce foreign investment in Cambodia, and the financial crisis would prevent tourism growth, he said. 

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