The Cambodian economic growth is projected to accelerate slightly to 6.9 percent in 2018, compared with 6.8 percent in 2017, buoyed by a rebound in textile and apparel exports as well as tourism and agriculture, says a new World Bank report.
However, the group said risks remain with potential election-related uncertainty and periodic jolts of protectionism escalating trade disputes between the world’s largest trading nations.
The latest Cambodia Economic Update (CEU), launched on Thursday, said rising government spending and favourable global conditions, including robust demand in advanced economies, are expected to underpin Cambodia’s high growth trajectoryInguna Dobraja, World Bank Country Manager for Cambodia said, “investing in people is the best for a more prosperous future”.
“To maintain strong growth, it is essential that Cambodia invests more in education and skills training while addressing the constraints facing small and medium businesses”, he said.
Risks remain, however, and they include erosion of export competitiveness due to rapidly rising real wages, a buildup of vulnerabilities from a prolonged real estate and construction boom, potential election-related uncertainty, and periodic jolts of protectionism and escalating trade disputes between the world’s largest trading countries, according to the report.
The report noted Cambodia can diversify growth and create more jobs by reducing the costs of company formalisation, operation and financing.
Tourist arrivals accelerated to 11.8 percent in 2017, compared with 5 percent in 2016, thanks to the authorities’ efforts to establish more regional flights, including to China, an important market for tourism.
Sinan Thourn, president of Cambodian Tourism Federation and the chairman of Pacific Asia Travel Association (PATA), said the number of arriving tourists in the last four months of this year did not increase. However, the quantity of Chinese tourists grew.
“If we look at the market share it is not like 2016 and 2017 [when tourism grew overall],” Thourn said.
While he was optimistic over the upcoming elections, Sinan also expressed some concerns.
“I don’t have any pessimism the election will deter tourists,” he claimed, adding that, “we know the politicians in our country always fight each other, but it never effects the tourism sector; it is just normal”.
However, he expressed concerns if the EU or US were to take any action.
“What I am worried about is that the EU and US will look at Cambodia in a different way, or, if they put a travel ban on the Kingdom it will impact tourist arrivals,” he said. “However it is just a small factor as Chinese tourists now lead.”
While the report said the growth in the construction sector is an important driver of growth and a creator of jobs, it also recommends that Cambodia closely monitor the construction and real estate boom by developing macro-prudential policies to help reduce the scope for speculative activities.
The agriculture sector also rebounded, with the expansion of rice and rubber plantations and the gradual recovery of agricultural commodity prices, according to the report.