Cambodia's economy remains in a “robust” condition but economic growth is projected to slow slightly this year compared to last, mainly due to weaker than expected external demand, according to a World Bank report released on Wednesday.
The bank forecast the Cambodian economy to grow seven per cent in 2019, slightly lower than the 7.5 per cent seen in 2018, as exports moderate in line with deceleration of global demand.
However, the bank’s expert said the seven per cent growth rate is still considered high and the economy remains strong.
“Robust economic growth is expected to result in continued poverty reduction. The longer term outlook, however, depends on the country’s ability to absorb rising FDI [foreign direct investment] inflows, while promoting domestic investment,” the World Bank said in its report.
The report addressed the risks and challenges related to uncertainty over the potential withdrawal of Cambodia’s access to the EU’s Everything But Arms (EBA) preferential trade agreement.
It said that if Cambodia loses access to the EBA scheme, which currently provides the Kingdom duty free and quota free access to the EU market, it would likely result in slower export growth.
In addition, given Cambodia’s heavy reliance on capital inflow from China, a sharp slowdown in the Chinese economy could dampen growth prospects.
World Bank senior economist Ly Sodeth said on Wednesday that the Kingdom’s economic growth accelerated last year to reach 7.5 per cent, higher than the bank’s initial projection of seven per cent.
Sodeth added that garment and footwear exports, which account for more than two-thirds of the Kingdom’s total merchandise exports, recorded a four-year high – growing by 17.6 per cent in 2018, up from the 8.3 per cent growth seen in 2017.
“The key driver, which is actually the export of garments and footwear to the US and EU, grew rapidly, with the US market growing even faster than the EU market. That is the main factor behind the better than expected GDP growth last year,” he said.