Gains in exports and increased foreign direct investment (FDI) are expected to drive gross domestic product (GDP) growth by 5.3 per cent this year and expand to 6.5 per cent in 2023, based on Asian Development Bank’s (ADB) latest prediction.
According to its 2022 Asian Development Outlook, industrial production will rise 8.1 per cent year-on-year in 2022 and 9.1 per cent next year, while the services sector will improve, coming in at 4.8 per cent in 2022 and 6.8 per cent in 2023.
The implementation of the strategy to develop Cambodia’s garment, footwear and travel goods sector will underpin growth as well as increase its competitive edge.
Goods and services exports are projected to grow in these two years, thanks to rising external demand for Cambodian products and the gradual recovery of the tourism sector.
“The reopening of the economy and the widespread vaccination against Covid-19 will lead to a gradual recovery of the tourism sector, which will support the demand for accommodation, food, transportation and other direct services,” the report read.
It, however, called for the diversification of the economy to ensure sustainable growth.
Speaking at the launch of the Asia-Pacific Development Outlook 2022 (ADO 2022) on April 6, Anthony Gill, ADB acting country director reiterated that Cambodia’s GDP growth for 2021 recovered to three per cent after contracting 3.1 per cent in 2020.
“The government has implemented policies to reduce the negative impact of Covid-19 on businesses and people’s incomes and support economic restoration. Extensive vaccination allowed Cambodia to reopen its borders for trade and tourism, leading to positive growth prospects for this year and 2023,” he said.
But, increasing trade and tourism alone would not be enough to help Cambodia sustain high economic growth.
“Cambodia, which focused on manufacturing and exporting garments, travel goods and footwear, could benefit from the diversification of light industries such as bicycles, spare parts, electronics and wiring products. This diversification will make the economy more resilient to crises of foreign demand,” he advised.
ADB is in the process of implementing an investment project worth $2.3 billion. The bank’s budget which will be allocated between 2022 and 2025 includes $1.44 billion in concessional loans and $37 million in grants to support economic development and recovery from the pandemic.
Meanwhile, Royal Academy of Cambodia economic researcher Ky Sereyvath forecasts that Cambodia’s economy might “grow slower” than ADB’s projection of 5.3 per cent this year.
His estimate puts GDP growth at around three per cent, based on current data and economic conditions, although they are subject to change.
He understood that ADB’s remarks were in relation to the increase in Cambodia’s exports in the garment sector and the implementation of free trade agreements (FTA) with China and South Korea on agricultural exports such as Pailin longan and mango.
“Japan also imports many products from Cambodia. Some domestic sectors will also grow, such as the retail sector,” he told The Post.
However, Sereyvath viewed that there are “still some sectors that continue to suffer” and face persistent challenges that are “difficult to recover from”, including the real estate sector and tourism.
“In particular, international tourism as other countries have not recovered yet from the Covid-19 crisis,” he said.