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Cambodia defies global crisis

Cambodia defies global crisis

121228 08
A farmer uses a combine to harvest rice in Kandal province’s Kandal Stung district in December 2012. Photograph: Pha Lina/Phnom Penh Post

Cambodia's economic performance this year has been heartening despite the global economic slowdown, especially the chaos caused in Europe by the sovereign-debt crisis and the sluggish recovery of the US economy.

In October, the International Monetary Fund (IMF) revised its world growth projections to 3.3 per cent and 3.6 per cent in 2012 and 2013 respectively, lower than the its estimates  in July.

Growth projections for the US were decreased to 3.3 per cent and 3.6 per cent in 2012 and 2013 respectively.

European growth was revised to 0.1 and 0.8 per cent in 2012 and 2013 respectively. China’s growth projections also declined, to 7.8 per cent this year and 8.2 per cent in 2013.

In September, the IMF raised its projection for Cambodia‘s growth to 6.5 per cent in 2012 from an earlier projection of 6.3 per cent. Inflation, after decelerating through mid-year, is projected to average about 3.5 per cent in 2012 and four per cent in 2013.

The Asian Development Bank lowered its growth estimate to 6.4 per cent.

The Cambodian government recently revised its own growth projection to seven per cent this year from 6.5 per cent in September.

The inflation rate is running below five per cent, according to the Ministry of Economy and Finance.

“Cambodia’s economy is proving its strength with a growth projection of seven per cent annually, although the global economic outlook at the end of 2012 and into 2013 will continue to face high risk because of Europe’s debt crisis and the slow recovery of the US economy,” a ministry press release said.

The release also highlighted the improvement in the Kingdom’s four main pillars of growth: agriculture; industry (garments and textiles); construction and real estate; and tourism.

Data from the Ministry of Commerce shows total exports rose almost 11 per cent over the first 10 months of this year to almost $5 billion, compared with the corresponding period last year.

The value of garments and textiles, which make up about 80 per cent of Cambodia’s exports, increased by nine per cent to $3.826 billion, but the value of agricultural products — which account for about 10 per cent of exports — fell 10 per cent to $312 million.

Foreign tourist arrivals climbed nearly 24 per cent during the period to almost 2.86 million, according to Ministry of Tourism statistics.

Data from the Ministry of Land Management and Urban Planning shows the value of approved investment in the construction sector rose by 73.3 per cent to $1.923 billion in 1,494 projects.

Ministry of Commerce spokesman Kong Putheara reaffirmed that exports had not been affected by the slowdown in the global economy.

“I don’t see any slowdown in exports so far. We still have two main export markets, the US and the EU,” Putheara said.

“At the same time, we are also looking to some Asian markets, because we need to diversify our markets.”

IMF country director in Cambodia Faisal Ahmed also said the downturn was having little impact on Cambodia’s economy.

“Despite the global slowdown, Cambodia’s economic performance has held up well, driven by resilient exports, robust tourism and construction, and with growing signs of economic diversification,” Ahmed said.

“We welcome the increase in reserve requirement, an important first step towards safeguarding financial stability, and the National Bank of Cambodia’s overall improvement in banking supervision.

“As in any rapidly evolving financial system in a developing country, managing financial deepening, including moderating credit growth and the continued strengthening of financial-sector supervision, will remain important.”

Hiroshi Suzuki, an economist at the Business Research Institute for Cambodia, said the Kingdom was still attractive to foreign investors.

“We‘re seeing a healthy trend of foreign direct investment, especially by Japanese manufacturers,” Suzuki said.

“This is a real driver of growth,  and it will have very positive effects on Cambodian exports and employment.

”I believe this inflow will continue, because the labour cost in neighbouring countries is going up.” Suzuki cautioned, however, that the power sector was still a weak point.

This year marked another milestone in Cambodia’s improving economic fortunes with the opening of capital markets in mid-April and life insurance arriving in March.

The Kingdom’s chairmanship of ASEAN was also an important event for the country in demonstrating to the world that it was improving.

“Cambodia’s second chairmanship of ASEAN provided a timely opportunity to showcase the economic progress achieved over the past decade, including the country’s strong growth performance and commendable reduction in poverty,” Ahmed said.

The IMF projects Cambodia’s growth in 2013 will edge up to 6.7 per cent, with inflation averaging four per cent.

Faisal suggested that creating more fiscal space, maintaining the improvement in monetary policy and financial supervision, and promoting broad-based, inclusive growth would be important policy goals for the government in the coming year.

To contact the reporter on this story: May Kunmakara at [email protected]