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

  • WHO: Covid in Cambodia goes into new phase

    The World Health Organisation (WHO) in Cambodia said that Cambodia has reached a new phase of the pandemic with “decreasing case numbers, high vaccination coverage and a more transmissible circulating variant threatening a hidden surge”. In a press release on September 6, the WHO said that

  • Purging Sihanoukville’s past with a new masterplan

    Amid illicit activities, haphazard development and abandoned projects, the coastal city of Sihanouk province needs a reset to move forward. A new masterplan might be the answer to shake off its seemingly mucky image to become the Shenzhen of the south Gun toting, shootouts, police

  • 'Pursue your goals, reach out to me': Young diplomat tapped as envoy to South Korea

    Chring Botum Rangsay was a secretary of state at the Ministry of Foreign Affairs and International Cooperation before being designated as the new Cambodian ambassador to South Korea. According to her official CV published on the foreign ministry’s website, she started her first government

  • International air visitor arrivals dip 93%

    The number of foreign tourists entering Cambodia through the Kingdom’s three international airports witnessed a sharp 92.5 per cent year-on-year decline in the first seven months of this year, according to the Ministry of Tourism. The airports handled 51,729 international tourists in the January-July period versus

  • School reopening ‘offers model for other sectors’

    World Health Organisation (WHO) representative to Cambodia Li Ailan said school reopening process should be used as a role model for reopening other sectors currently mothballed by the Covid-19 pandemic. Li strongly supports the government’s decision to reopen schools, saying it is a decision

  • Covid jab drive for 6-11 age group to begin Sept 17

    Prime Minister Hun Sen has permitted Covid-19 vaccinations for over 1.8 million children aged 6-11 across the country from September 17 in order for them to return to school after a long hiatus. Hun Sen also hinted that vaccinations for the 3-6 age group will follow in