The International Monetary Fund has upgraded its outlook on Cambodian GDP growth in 2011 from 6.5 per cent to 6.7 per cent just days after government officials announced a full percentage-point reduction in economic expectations.
Stabilisation in the real estate sector, as well as strong increases in agricultural production and garment exports, accounted for updated projection, according to the IMF’s Asia-Pacific Economic Outlook released Thursday at a conference in Tokyo.
Flood devastation – the worst in at least a decade – prompted a government downgrade of GDP growth from 7 per cent to 6 per cent, however, according to a speech made last week by Deputy Prime Minister Keat Chhon at an International Business Chamber conference.
“It is true that we are expecting Cambodian growth to remain strong, in fact, to increase in 2011 before slightly moderating in 2012,” IMF Asia-Pacific director Anoop Singh said at the conference in Tokyo.
“Most importantly we have seen Cambodian growth this year to be quite robust, from agricultural production to the export of the garment,” he said, adding that the stabilisation in real estate was also translating into a higher average growth rate.
Estimates on Cambodia’s year-on-year economic performance have varied widely this year – particularly in the past two months. Prime Minister Hun Sen predicted 8.7 per cent growth last month – matching an estimate from the Economic Institute of Cambodia – while Asian Development Bank put the figure at 6.8 per cent.
Sustained flooding coupled with poor economic projections in the United States and Europe contributed to last week’s official downgrade.
In the face of the new IMF projection, some experts say the Kingdom’s growth could be higher.
“We were expecting growth to be 8 per cent or more this year, but expect it to come back slightly due to the impact of the floods – perhaps around 7 per cent,” Stephen Higgins, CEO of ANZ Royal Bank, said in an email.
Underlying strengths in manufacturing and services, as well as strong company profits, have generated confidence in the country’s performance, Higgins said. Agriculture had looked strong but will clearly be impacted by the floods, he said.
New garment quotas in European markets contributed to buoyant exports in Cambodia and projected the country’s growth next year at 6.5 percent, according to the IMF report. Keat Chhon announced the same figure for 2012 GDP growth during his speech last week.
Higgins put the 2012 outlook higher, provided there is no further deterioration in US and European markets.
“I would expect 8 per cent or more in GDP growth for Cambodia [in 2012], supported by the level of investment we are currently seeing. The reconstruction works from the flooding will also be supportive of GDP growth in 2012.”