The central bank has put Cambodia’s economic growth at five per cent for 2022, due to the anticipated global recovery, despite the potential emergence of new variants of the Covid-19 coronavirus.

The National Bank of Cambodia (NBC) made the prediction in its “Macroeconomic and Banking Sector Developments in 2021 and Outlook for 2022” report released on December 31.

The economy expanded by around three per cent in 2021, backed by the resumption of domestic activity and a variety of benefits derived from the world economy, the central bank said.

The global economy is expected to remain on a positive growth trajectory in 2022, with diverging rates across countries based on the effectiveness of Covid management and supportive government policies, it said.

But SARS-CoV-2 mutations such as Omicron will remain a key challenge this year, along with a whole suite of other issues related to climate change, geopolitics and trade, it noted.

The gradual global economic recovery will support Cambodian exports, especially of non-garment products such as electrical spare parts and bicycles that align with diversification strategies, the NBC suggested.

It said the Regional Comprehensive Economic Partnership (RCEP) and free trade agreements (FTA) struck with China and South Korea would create a strong tailwind this year for the agricultural sector, trade, goods and services, investment flows and e-commerce.

The central bank also pegged the inflation rate at 2.6 per cent in 2022, down from 2.9 per cent in 2021, and said the exchange rate of the local currency would remain stable, at about 4,075 riel to the greenback.

The World Bank in December put the Kingdom’s real gross domestic product (GDP) growth for 2022 at a slightly lower 4.5 per cent, saying the economy is expected to continue on recovery mode amid a rollback of Covid-related restrictions.

“Over the medium term, growth is expected to trend back to potential. As the authorities have now relaxed travel restrictions, ‘reopening’ the country, key sectors such as tourism, travel, hospitality, and wholesale and retail are starting to recover, propelling economic recovery in the medium term.

“In addition to the economic recovery plan that will be introduced soon, the newly introduced Law on Investment, the recently ratified Cambodia-China Free Trade Agreement and [RCEP], and the recently signed Cambodia-Republic of Korea Free Trade agreement may help attract foreign direct investment inflows to the country in the coming years,” the bank said.

Despite accelerated vaccination progress, risks of further disruptions remain high, given relatively high numbers of infections and mortality, the Washington-based multilateral development lender said.

“The coronavirus continues to be unpredictable, and the possibility of new or existing variants of the virus spreading in the country could lead to a possible resurgence in new cases.

“A slowdown in global demand could hurt export-oriented sectors of the economy, while the tourism sector may recover even more slowly than expected, as consumers may remain reluctant to travel far distances despite eased travel restrictions,” it said.

High credit growth and concentration of domestic credit in the construction and real estate sector remain a key risk to Cambodia’s financial stability, it added.