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ADB revises up GDP growth forecast

ADB revises up GDP growth forecast

THE Asian Development Bank has raised its 2010 economic growth forecast for Cambodia to 5 percent, thanks in part to strengthening garment exports, but experts warned that further labour disruptions may hurt the sector’s momentum.

The updated Asian Development Outlook 2010, released by the ADB in Hong Kong, predicted that gross domestic product would rise by 5 percent this year – up from a previous estimate of 4.5 percent.
GDP growth for 2011 remained at an estimated 6 percent, while the expected inflation rate was revised downwards from 5 percent to 4 percent for the year, helped by stabilising international petrol prices.
The report said higher growth in Cambodia would be underpinned by strengthening exports, particularly garments and tourism.
“The key challenges [for countries such as Cambodia] are how to sustain the level of textiles and garment exports in an increasingly competitive global market,” it said.
ADB’s chief country economist, Peter Brimble, said that strengthening international markets for Cambodia’s garment exporters were one factor that led the bank to revise its forecast upwards.
He also acknowledged that recent labour strikes – which led multinationals Adidas, Gap, Walt Disney Company, H&M, and Levi Strauss to pen a letter expressing concerns last week – could negatively affect growth rates into the second half of the year.
“It’s been a one-time shot at the moment. But [if the strikes] happened regularly it would impact growth rates,” Brimble said. However, he said strikes had been less disruptive than previous ones, and that many buyers had placed orders earlier in the year, minimising fallout.
Garment Manufacturers Association in Cambodia Secretary General Ken Loo said strikes had negatively impacted the sector, but the extent remained to be seen.
The industry grew 18 percent in the first half of the year compared to 2009, but had been boosted by temporary, unsustainable demand, he said. GMAC expects the annual growth rate to be 10 percent by year’s end.
ADB’s revised forecast is in line with government expectations, according to Ministry of Economy and Finance Secretary of State Hang Chuon Naron.
He said that although the garment and tourism sectors were on the rise, construction remained in a downturn. He added, however, the agricultural sector was on track to expand 5 percent this year, despite concerns about late rains.
Kang Chandararot, president of the Cambodia Institute for Development Study, said Cambodia’s GDP would grow next year thanks to a government policy to diversify exports and seek investment in a wider range of sectors, rather than focusing on garments.
Foreign direct investment was also highlighted by ADB. Intra-regional FDI increased substantially during the past few years, most notably from China, according to its report.
“China’s outward FDI to ASEAN has accelerated during the global crisis, expanding almost threefold between 2007 and 2009 alone,” it said.
Approved investment from China in Cambodia increased 119 percent in the first six months of 2010, compared to the same period of 2009.

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