Logo of Phnom Penh Post newspaper Phnom Penh Post - Economy resilient to global headwinds: World Bank

Economy resilient to global headwinds: World Bank

A worker stitches fabric in a garment factory in 2013.
A worker stitches fabric in a garment factory in 2013. Pha Lina

Economy resilient to global headwinds: World Bank

Despite global uncertainty related to political shifts in the West and a continued Chinese economic slowdown, Cambodia showed strong growth prospects for the next several years, according to the World Bank’s latest report.

The latest Global Economic Prospects report from the World Bank, titled “Weak Investment in Uncertain Times,” looked back on the previous year with a generally negative outlook, impacted by the unexpected election of Donald Trump in the US and the sudden Brexit vote in the United Kingdom to leave the European Union.

In Asia, slower Chinese economic expansion continued to pose a risk to growth, but had not affected Cambodia as much as previously expected, with both China and Japan maintaining strong levels of foreign direct investment (FDI) in the region, the report said.

The World Bank estimated GDP growth in the Kingdom stood at 7 percent for 2016 and forecasted growth between 6.9 and 6.8 percent for the next three years.

“Exports of goods provided support to growth in Cambodia, which enjoys sizable foreign direct investment into its garments sector,” the report said.

“Chinese investors continue to be heavily involved in various projects across the region and Japan remains another important source of FDI flows to several regional economies.”

The World Bank cited the need for Cambodia to strengthen its regulation of specialised banks and microfinance institutions (MFIs), which it said have contributed to a rapid growth of credit that was creating potential risks of financial instability in the Kingdom.

“Enhanced transparency, strengthened accountability, and more responsiveness of state institutions to the needs of the private sector would bolster investor confidence,” it said of Cambodia and similar countries in the region.

David Totten, director of Emerging Markets Consulting, noted that despite the attention given to slowing Chinese growth, Asia’s largest economy is still expanding in real terms, especially compared to developed economies in the West.

This has positively contributed to Cambodia’s economy and the World Bank’s forecast of high future real GDP growth in China should be an encouraging sign for the Kingdom, he added.

“As China shifts to higher value-added activities such as from manufacturing to services, or to more advanced manufacturing, you need to move the unsophisticated manufacturing somewhere else, hence we see China is the largest source of FDI in Cambodia,” he said.

He noted that all countries in the region that offer similar advantages to Cambodia, such as Myanmar, Laos and the Philippines, were “similarly bucking the global trend and forecast to grow via [China’s] regional value chain integration and accompanying cross border investment.”

Totten said that it was too early to infer the impact that recent political events would have on the global economy, including Cambodia, but in the near-term it would likely be minimal.

“The Brexit decision and the Trump rhetoric indicate, in the opinion of some observers, a significant change in the global system of relatively free trade,” he said.

“Clearly that introduces an element of uncertainty, but until the real terms of a Trump presidency or Brexit negotiations are known, the impact is likely to be small.”

MOST VIEWED

  • Kingdom accepts Chinese vaccine, PM first to get jab

    Prime Minister Hun Sen said China would offer Cambodia an immediate donation of one million doses of the Covid-19 vaccine produced by the Sinopharm company. In an audio message addressing the public on the night of January 15, he said Cambodia has accepted the offer and

  • Reeling in Cambodia’s real estate sector

    A new norm sets the scene but risks continue to play out in the background A cold wind sweeps through the streets of Boeung Trabek on an early January morning as buyers and traders engage in commerce under bright blue skies. From a distance, the

  • Hun Sen: Lakes filled in for national developments

    Prime Minister Hun Sen has announced continued operations to fill some lakes in Phnom Penh to create land for developments, though he is against the unrelated practice of damming rivers or blocking waterways. Speaking at the inauguration of the Ministry of Public Works and Transport

  • Koh Preus upgrades 70% complete

    Initial construction of a nearly $30 million tourism infrastructure project on Preah Sihanouk province’s Koh Preus Island is “about 70 per cent complete”, according to an official with the developer. Heng Thou, construction site manager of Angela Real Estate Co Ltd (ARE), told The Post that

  • Local media loses a giant, and The Post a great friend

    Cheang Sokha, a gifted and streetwise reporter who rose to the highest ranks of Cambodian media and was beloved for his sharp intelligence, world-class humour and endless generosity, died on Friday in his hometown of Phnom Penh. He was 42. His wife, Sok Sophorn, said he

  • Cambodia, India agree to start direct flights, tourism exchanges

    Cambodia and India have agreed to start direct flight connections and promote closer tourism exchanges and cooperation in all areas after the Covid-19 saga comes to a close. The agreement was reached during a meeting between Cambodian Minister of Tourism Thong Khon and newly-minted Indian