Think tank says better-than-expected global recovery will lessen effects of economic crisis on the Kingdom, slashes projected GDP contraction by half
THE Economist Intelligence Unit (EIU) has revised its 2009 growth forecast for Cambodia upwards from a 3 percent contraction to a smaller 1.5 percent decline, citing changes to its global forecast.
"The main reason we have revised up our Cambodia GDP forecast is that the global recession is likely to be less severe than we had previously expected, mainly owing to the impact of fiscal stimulus in the world's leading economies," EIU economist Nick Owen said by email from London on Thursday.
"There's certainly no change to our view that Cambodia is highly exposed to the global recession, as shown by the decline of about 20 percent in garment exports in the first six months of the year."
In the report, the EIU noted that a 1.5 percent contraction would still be the "worst performance" since records began in the mid-1990s. However, it projected that growth will resume in 2010, when gross domestic product will expand by 3.3 percent. It previously predicted a 2.2 percent expansion for next year.
The EIU, which is part of the London-based Economist Group, the publisher of The Economist magazine, projected at the beginning of the year that the Cambodian economy would grow 1 percent through 2009, but downgraded that estimate in April.
At the time, the International Monetary Fund and World Bank separately predicted a 0.5 percent contraction, and the Asian Development Bank forecast 2.5 percent growth.
The Cambodian government rejected these forecast in April, saying that a strong agricultural and informal sector will lead to growth of more than 6 percent.
Cheam Yeap, a senior Cambodian People's Party lawmaker and chairman of the National Assembly's Finance and Banking Commission, rejected the EIU's latest projection Thursday, saying growth would slow but the economy would not contract.
"I think growth will still be positive, not negative," he said. "Maybe it will drop to 1 percent in the worst-case scenario."
He also cast doubt on the ability of foreign organisations to accurately predict Cambodia's economic fortunes. "They have been wrong since 2005," he said.
Sam Rainsy Party spokesman Yim Sovann said the government had left Cambodia at the mercy of external economic conditions by not doing enough to stimulate the domestic economy.
"[Cambodia] cannot get out [of the crisis] because they haven't taken any action. If they have, it is just very little," he said. "If Cambodia has a recovery, it's only because of the effects of the world economy," he added.