Logo of Phnom Penh Post newspaper Phnom Penh Post - Deeper economy drives growth

Deeper economy drives growth

A worker operates machinery during the opening of a steel roof factory in July 2014.
A worker operates machinery during the opening of a steel roof factory in July 2014. Pha Lina

Deeper economy drives growth

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.”

This version corrects an earlier error in the first-half figures for customs and tax revenue.

MOST VIEWED

  • NagaWorld casinos set to reopen, schools to follow

    NAGACORP Ltd has requested that it be allowed to reopen its NagaWorld integrated resorts in Phnom Penh after the government recently approved casinos to operate again, provided they follow Covid-19 prevention measures set by the Ministry of Health. Mey Vann, the director-general of the Ministry

  • Cambodia armed with money laundering laws

    Money laundering will now carry a penalty of up to five years in prison while those convicted of financing terrorists will be jailed for up to 20 years, according to new laws promulgated by King Norodom Sihamoni and seen by The Post on Thursday. Comprising nine

  • Schools to be reopened in ‘three stages’

    With guidance from Prime Minister Hun Sen, the Ministry of Education, Youth and Sport, is in the process of reopening schools in three stages. But no timeline has been set, ministry spokesperson Ros Soveacha said on Thursday. Soveacha said the first stage will be to

  • Thai border crossings eased

    The Cambodian Embassy in Thailand said in an announcement on Wednesday that Thailand’s government has allowed certain passengers from several countries to enter its borders. The visitors must go back to their country immediately after their duties in Thailand are fulfilled, the embassy said.

  • Gov’t says tourism recovers slightly despite pandemic

    The Ministry of Tourism and the Phnom Penh municipal administration have recognised 33 tourism businesses in the capital which have consistently implemented safety measures for tourists and adhered to the code of conduct issued by the ministry. Recently, the ministry announced that tourism businesses had to

  • Mull ASEAN border opening, PM urges

    Prime Minister Hun Sen has requested that ASEAN launch a scenario for gradually reopening cross-border travel and trade between countries in the region. He said ASEAN has had more success combating Covid-19 compared to other regions. The prime minister’s request was made at the

  • Ministry reports 11 new Covid-19 cases, reiterates vigilance

    Minister of Health Mam Bun Heng has urged people to continue practising virus prevention techniques after 11 people tested positive for Covid-19 within two days after arriving in the Kingdom. Speaking on Sunday, Bun Heng stressed the importance of washing hands, wearing masks or scarves when

  • Koh Rong land ‘belongs to firm’

    Preah Sihanouk Provincial Administration spokesperson Kheang Phearum told The Post on Sunday that the 35ha being bulldozed by Royal Group Co Ltd in Koh Rong belongs to it after it was leased to it for 99 years by the government in 2008. Phearum said the land does

  • Nine on Indonesia flight Covid-19 positive

    The Ministry of Health on Saturday confirmed nine more imported cases of Covid-19. The nine ‒ eight Cambodians and one Indonesian, aged 22 to 26 ‒ arrived in Cambodia on Thursday via a direct flight from Indonesia and are receiving treatment at the Khmer-Soviet Friendship Hostipal in Phnom Penh.

  • Kingdom’s financial sector healthy

    Cambodia's financial sector remains on a sustainable growth path despite the Covid-19 pandemic squeezing crucial industries, National Bank of Cambodia (NBC) governor Chea Chanto said. Tourism, garments and footwear have borne the brunt of the Covid-19 impact, he said, whereas the financial and agriculture sectors