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Logo of Phnom Penh Post newspaper Phnom Penh Post - Growth to slow down, but rebound expected

Growth to slow down, but rebound expected

Cambodia's economic growth will slow slightly during 2002, but is expected to

rebound in 2003, according to two new reports from the World Bank and the Asian

Development Bank (ADB).

The ADB Outlook 2002 report predicts growth of

4.5 percent during 2002 rising to 6.1 percent in 2003. The World Bank's East

Asia Update was in broad agreement. It stated that slower growth in garment

exports and tourism receipts were expected to give 2002 the lowest growth for

several years.

The ADB stated that the East Asia region is moving

towards a faster-than-expected economic rebound, with growth in neighboring Laos

PDR and Vietnam continuing to outstrip that in Cambodia. The ADB report

predicted Laos' economy would grow 5.8 percent this year and Vietnam 6.2

percent. Thailand, however, was looking at a mere 2.5 percent.

Funcinpec

secretary-general, Prince Norodom Sirivudh, said he would take the message about

Cambodia's economy to Davos, Switzerland for the World Economic Forum, which is

the global meeting for economic leaders.

"A lot of Asian countries have

challenged that [the region] must have our own economic forum," he said. "This

is a big challenge for Cambodia and for Asia as a whole."

The ADB said

prices in Cambodia have remained virtually unchanged over the past three years,

but forecast they would creep higher over the next two years. Inflation, which

was zero in 2001, will hit 2 percent this year and 3 percent in 2003 driven by

an increase in demand for goods and services. The exchange rate will likely

depreciate in line with inflation.

Both banks said the Cambodian economy

remained relatively strong last year despite the global economic slowdown. The

ADB concluded Cambodia's economy had grown at 5.3 percent in 2001, below the

rate of the previous year and below the government's target rate of 6.1

percent.

The agricultural sector expanded by 5 percent to account for

almost one-third of the economy. However, that growth rate is causing some

concern since it is likely to prove insufficient to reduce poverty in rural

areas where 80 percent of the population live.

Underemployment of

unskilled workers in Phnom Penh resulted in wage deflation last year. Despite

that, per capita incomes nationwide climbed 2 percent.

Cambodian exports,

mainly of agricultural products and garments, increased slightly to $1.35

billion last year from $1.26 billion in 2000. That, the ADB concluded, reflects

"a healthy external demand for Cambodian exports". The ADB estimated foreign

direct investment - a perennial problem for the Cambodian economy - at a mere

$120 million in 2001.

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