Cambodia is expected to face relatively few issues associated with food shortages as the Russia-Ukraine conflict drags on, according to a Phnom Penh-based senior economist at the World Bank (WB).
The assertion comes as the Washington-based multilateral development lender on June 30 maintained its economic growth projection for Cambodia at “about 4.5 per cent” this year.
The WB’s June 2022 economic update for Cambodia, Weathering the Oil Price Shock, indicates that although merchandise exports and domestic economic activity remain on the recovery path from the financial depression caused by the Covid-19 crisis, growth has been disparate as the Ukraine conflict pushes up inflation.
WB senior economist Ly Sodeth maintained that as a major food producer and exporter, Cambodia is well-positioned to weather fallout from the trifecta of the protracted Ukraine conflict, inflation, and global food shortages.
“In short, our country has enough food, especially milled rice, which will make it possible to withstand the food crisis.
However, food exports have been confronted with challenges such as rising fuel prices, leading to higher transportation costs for domestic and international shipments, making it difficult to get them to their destinations,” he said.
As food products tend to be low-value and high-tonnage, jumps in shipping costs significantly cut into profit margins, requiring greater consideration when choosing transportation modes, to minimise expenses during the ongoing fuel price onslaught, he explained.
WB country manager Maryam Salim stressed that poor and vulnerable Cambodian households with limited savings would most likely receive the full force of the oil price rout.
“Rising energy and food prices due to the war in Ukraine are imposing additional burdens on the poor, and this will slow the pace of poverty reduction. The government’s cash transfer programme, which has been vital to poor households during the pandemic, will continue to be needed,” she said.
Cambodia Logistics Association (CLA) president Sin Chanthy said that although the fuel price crisis has caused some headaches for the logistics sector, industry players have been working with the government to ensure that domestic rates remain reasonable, so as to not seriously affect the economic situation of the average Cambodian.
“The report published by the World Bank on the economic situation in Cambodia is acceptable, as it is in line with some of the realities that we’ve encountered,” he said.
The WB economic update found that Cambodian merchandise exports were $4.8 billion in the first quarter of this year, up 26 per cent year-on-year.
Although traditional growth drivers – especially garments, footwear and travel goods – continue to expand, newer manufacturing industries like electrical and vehicle parts are burgeoning, as exports to the US balloon, it said.
The report also recommended policies to sustain economic recovery, concerning, inter alia, Covid-19 management, retail price stabilisation, consumer and investor confidence, export promotion – especially in agricultural commodities – with a focus on trade facilitation and reducing costs associated with doing business.