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IMF sees Kingdom on track to solid recovery

Washington
INTERNATIONAL Monetary Fund senior officials praised Cambodia for its economic performance this year and said the country’s foreign direct investment was set to grow up to 20 percent.

The IMF’s senior economist and chief of mission to Cambodia, Olaf Unteroberdoerster, said on Saturday at the sidelines of the at the IMF-World Bank annual general meeting in Washington that foreign direct investments into Cambodia had “turned the corner” this year and on current trends would increase about 20 percent over 2009 – although it would take some time before it fully recovered.

“As the excess from a pre-crisis construction boom is being unwound, FDI is expected to remain below its 2008 peak level for a couple of years,” he said.

Cambodia’s FDI was $515 million in 2009 and was $795 million in 2008.

In the updated World Economic Outlook just released in Washington, the IMF maintained its forecast for Cambodia’s GDP growth at 4.8 percent for 2010 and 6.8 percent for 2011 – the same rates it predicted in April.

Although Cambodia’s GDP growth is significantly positive, the report showed it is still lower than its immediate neighbours, Laos, Vietnam and Thailand, which are growing at 7.7 percent, 6.5 percent and 7.5 percent respectively this year.

“Cambodia’s economy is certainly recovering well from the contraction [minus 2 percent] we saw last year,” said Anoop Singh, director of the IMF’s Asia and Pacific Department. He was speaking on Saturday in the press briefing on the economic outlook for the Asia and Pacific region.

He said the IMF had been carrying out a financial-sector assessment programme for Cambodia and believed it was an important time for Cambodia in its efforts towards development of a crisis-management framework and improved supervision and regulations. He also said the government was proactively looking at the policies that would improve the business environment.

Anoop Singh said that when comparing Cambodia to other low-income countries in Asia, it remained the case that two important steps were needed. “To raise the tax ratio, I should mention that Cambodia’s tax-to-revenue ratio to GDP lags many comparator countries in the region by at least five to seven percentage points,” he said.

“Most importantly, as in other countries, [Cambodia needs] to raise infrastructure investment including in agriculture, but also, I think the main point is to broaden and improve the business environment, attract capital into Cambodia, and broaden the sources of growth.”

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