Flagging garment sector largely behind four-point drop
SLOWING demand for Cambodian garments is expected to see overall economic growth drop to 6.0 percent by 2009, according to the Asian Development Bank, which said that despite negative impacts on manufacturing, the service sector - namely tourism and finance - will remain strong.
"The near-term economic outlook has deteriorated as a result of weaker growth in the US, higher fuel and non-fuel commodity prices and continued US dollar weakness," the ADB wrote in a revision of its Asian Development Outlook 2008 report, released Tuesday.
"The major challenges are to diversify sources of growth, by such means as greater rural development, and to reduce poverty faster," the ADB added.
Growth for 2007 is estimated at 9.6 percent, the ADB said, adding, however, that 2008 growth was revised down to 6.5 percent.
Apart from a flagging garment industry, a pullback in Cambodia's agricultural sector - meant to be a major economic driver - also accounted for the drop in growth, it added. The services sector, however, remains strong, with tourism arrivals continuing to rise and construction activity, much of it funded by foreign investment, maintaining a brisk pace.
Globally high food and fuel prices, coupled with surge in private sector credit, has had the greatest impact on one of the region's most robust economies, resulting in 25 percent inflation.
AS MANY AS TWO MILLION PEOPLE MAY HAVE SLIPPED BELOW THE POVERTY LINE.
"Inflation is widely believed to have accelerated this year," the ADB said. Consumer Price Index figures released by the government Monday showed the price of goods up more than 22 percent in the year to August.
While inflation is expected to ease to 15 percent next year, "there are indications that higher inflation, especially of food prices, has set back efforts to reduce poverty", the ADB said. "Preliminary evidence suggests that as many as two million people may have slipped below the poverty line."
Cambodian People's Party lawmaker Cheam Yeap dismissed the figures as only estimates. "The government tries very hard to spur growth and reduce poverty," he said.