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Competitiveness, diversification plan underway, says IMF

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Workers work at a garment factory in Phnom Penh. Post Pix

Competitiveness, diversification plan underway, says IMF

The government is proactively addressing economic risks and uncertainties through a structural reform plan aimed at improving competitiveness and diversification, International Monetary Fund (IMF) senior economist Jarkko Turunen said on Friday.

He was speaking at a press conference marking the conclusion of an IMF team’s 12-day visit to Cambodia for discussions on the 2019 Article IV consultation, which analyses the economic developments and policies of member countries.

The ongoing ‘Everything but Arms’ (EBA) review by the EU – Cambodia’s primary export partner – could lead to a suspension of preferential trade access later next year.

This could have a large negative impact on near-term economic activity, said an IMF press release on Friday.

Turunen, who led the IMF team, said a government project is currently in the works to address spending on job creation, human capital development and infrastructure spending.

The authorities continue to implement macro-prudential measures and are taking welcome steps to promote the effectiveness and transparency of those policy decisions, the IMF said.

At the same time, private sector credit, which is increasingly concentrated on the real estate and construction sectors, has accelerated and is expected to grow around 28 per cent this year, it said.

The World Bank’s East Asia and Pacific Economic Update report released last week said Cambodia’s economic outlook is facing several challenges – including the increase of credit provided to the construction and real estate sectors alongside rising indebtedness.

The report said the Kingdom must improve its external competitiveness to maintain moderate growth.

“It is an imperative to improve the country’s external competitiveness through increased productivity in the presence of rising minimum wages.”

Cambodia’s economic activity will remain strong with real gross domestic product growth expected at around seven per cent this year, owing to continued export growth and strong construction activity, while inflation is expected to remain stable at around 2.5 per cent, the IMF said.

The IMF stands ready to support the authorities’ reform efforts through policy advice and capacity development activities, it said.

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