The Ministry of Economy and Finance projects that Cambodia’s economy will remain robust for the rest of this year with a growth rate of 7 per cent despite global economic uncertainty, driven largely by the growth of the garment and service sectors.
The announcement came with the publication of a mid-year assessment of Cambodia’s macroeconomic outlook yesterday, which reported that the Kingdom’s industrial and services sectors are expected to expand by 11.4 per cent and 6.7 per cent in 2016, respectively. By contrast, the agricultural sector is projected to grow by just 0.5 per cent.
Vongsey Vissoth, secretary of state of Ministry of Economy and Finance (MEF), said that strong growth in garments and services would likely offset the Kingdom’s low agricultural performance, enabling economic stability over the medium term.
However, while he applauded the economy’s achievements, he said that policymakers need to tread cautiously due to the external risk factors such as China’s slowdown and unforeseen consequences of Brexit.
“Our airplane is still flying smoothly in 2016 and 2017, but sometimes we will meet turbulence, so we need to wear our seatbelts properly to avoid any injuries,” he said.
For garments, Vissoth highlighted that the strong growth of raw material imports was a sign that the sector was healthy, and that economic indicators showed that the country’s largest industrial engine was gradually moving up the value-added chain and producing higher-end goods.
According to the ministry’s report, garment and footwear exports for the first half of this year were valued at $3.49 billion, a 10.7 per cent increase from the $3.15 billion recorded during the same period last year.
The report warned that both tourism and foreign direct investment (FDI) were less buoyant, noting that for tourism, Myanmar was becoming a key competitor, while China’s slowdown would subdue arrivals to the Kingdom. Meanwhile, the economic slowdown in “China and subpar economic growth in many other [Asian countries] are likely to keep a lid on FDI inflows to Cambodia,” the report said.
The MEF also highlighted the role of strong revenue collection during the first half of this year through more stringent customs and taxation regimes. Cambodia collected $888 million in customs tax this year, and increase of 27 per cent, while additional tax revenue increased to over $825 million, a 17 per cent increase from 2015.
Kung Phoak, co-founder and president of Cambodia Institute for Strategic Studies (CISS), said that on a macro level, a continuing slowdown in agriculture should not be a concern as the economy has become increasingly dependent on a diversified industrial sector. However, he warned that the government cannot forsake agriculture and needs to increase production through mechanisation.
“We cannot give up on the agricultural sector to develop the country,” he said. “It is still very important for our economy and benefits rural people directly.”
Chan Sophal, director at the Centre for Policy Studies, said that while the report provided a good indication of the current macro-economic conditions, and that 7 per cent was a suitable figure for GDP growth, policymakers need to tackle the growing disparity in wealth and make economic growth more inclusive.
“In the country as whole, some people see a lot of prosperity while some see just a small amount, and by counting the average we can see that the economy is increasing,” he said. “Some farmers complain that they are not getting richer, only poorer, and that they need the government to ensure the agricultural markets.”