Cambodia’s central bank sounded an optimistic, but cautious, note on the economic prospects for the Kingdom next year, citing textile exports, low oil prices and increasing domestic demand as the main drivers of growth in 2015.

The National Bank of Cambodia released the Cambodia’s 2015 Macroeconomic Development and Prospect on Wednesday, and projected gross domestic product to grow by 6.9 per cent for 2015, climbing up slightly to 7 per cent in 2016.

While lauding the country’s economic growth, it also highlighted a few challenges, such as lower export competitiveness and the slowdown in China and European Union.

The release said that the US dollar appreciation and increase in garment sector wages was an emerging challenge for the country.

Independent economist Srey Chanthy said light industries, such as garment, clothes and shoe factories, which have so far been capital-heavy, could see outflows going into the new year.

“I think, if this is the case, capital flight management regulations may be needed – a lesson that can be learned from Malaysia,” Chanthy said.

On the NBC’s observation that a continuing slowdown in the EU and China would have an impact on Cambodia economic prospects next year, Chanthy said China’s slowdown could affect tourist arrivals in the Kingdom.

“The slowdown in the euro zone will have a much stronger impact on Cambodia, as it is the key destination for Cambodia exports,” Chanthy added.

Chanthy added that, given these known challenges, stakeholders, in the government and private sector needed to work to find innovative approached to deal with them.

“To be able to compete and survive [in a competitive manner], Cambodia’s economic, political and administrative systems have to be more efficient, inclusive and broad-based,” Chanthy said.

In light of the NBC’s projection raising concerns over Vietnam’s signing of a free trade agreement with the EU, as well as joining the Trans Pacific Partnership, In Channy, CEO of Acleda Bank, said the country could see capital outflows to its next-door neighbor, as well as to Myanmar, which was a much bigger market than Cambodia.

“[However] Vietnam’s labor costs are higher and Myanmar’s regulations are not quiet smooth; so capital outflow might not happen,” he said.

He said a slowdown in China will especially affect public sector projects, like roads and power projects.

“For individual business there may not be much impact. But for public sectors projects would be impacted.”

“People expected the Chinese stock exchange crisis to impact Cambodia, but in fact there is little impact on us so far, given our economic growth of 6.9 per cent,” he added, which was shade below the government’s projection of 7 per cent growth.