Logo of Phnom Penh Post newspaper Phnom Penh Post - Government rejects IMF's gloomy economic report

Government rejects IMF's gloomy economic report

Government rejects IMF's gloomy economic report

13_story110.jpg

Hun Sen says growth will hit seven percent, despite reports by both the

IMF and the ADB that the global crisis will badly impact the Cambodian

economy

Photo by:
AFP

Prime Minister Hun Sen waves during the Independence  Day celebration Sunday in Phnom Penh. He said he was committed to maintaining economic growth of seven percent. 

GOVERNMENT officials have rebuffed a gloomy economic forecast by the International Monetary Fund, saying the nation's predicted growth slowdown would not be as dire

as the world body suggests.

At the culmination of a two-week mission Friday, the IMF announced that lower foreign investment, as well as runoff effects from the global financial crisis, would push Cambodia's economic growth down to 4.8 percent in 2009, from a previously predicted rate of nine percent.  

But in a prepared speech Sunday for the 55th anniversary of Independence Day and the formation of the Royal Cambodian Armed Forces, Prime Minister Hun Sen said he was confident the government's strong economic record protected it against such a depreciative outlook.

"During the last four years, Cambodia has maintained an economic growth of two digits," he said.

"In the fourth mandate, the government will ensure the  achievement of economic growth of around seven percent a year and pull down the inflation rate to one digit."

Finance Minister Keat Chhon told the Post last week that economic growth would be no lower than 6.5 percent for 2009. Officials from the ministry Sunday were more inclined to accept the forecasted figure, but they claimed it was simply an inevitable consequence of a worldwide decline - one they warned could be much worse.

"This is the indirect impact of a global crisis," said Heng Chuon Naron, secretary general of the Ministry of Economy and Finance.

"There will be a slowing in growth, but five percent growth is higher than the world's most industrialised countries, such as the US and Europe, which are now facing growth as low as 0.5 percent," he said.

"We have not had a real estate crash like Vietnam and other countries, so it is not too bad."

He admitted, however, that a drop in tourism could be a hard blow for the economy.

"Because of the appreciation of the US dollar and higher airfares, it is now a lot more expensive for visitors to come to Cambodia," he said.  

"We will now have to focus on rural infrastructure, such as roads and bridges, to build the foundations for future growth, as well as bringing inflation down."

Gloomy forecast

Tal Nay Im, director general of the National Bank of Cambodia, told the Post Sunday she believed the IMF forecast  was based on assumptions of lower exports, especially to the US and Europe, as well as lower tourist arrivals.

However, she was hopeful that growth would be higher if agricultural yields were strong.

"Right now, we expect that the weather will be good. If there is no drought and enough rain, agricultural production will be high. If yields are high, we expect that economic growth will be higher than the IMF's prediction," she said.

"But if crops are unfavorable, growth could drop to the IMF's forecast."

Uncertain times

Economic observers have questioned the government's optimism, while acknowledging there were still unknowns.

Chan Sophal, president of the Cambodia Economic Association, said Sunday that he was reluctant to side with the government's more optimistic prediction.

"Cambodia's economic growth is now riding on many uncertainties, such as weather and foreign security," he said.

"Tourism is being affected by the dispute over Preah Vihear temple, and as for agriculture, we hope there is enough rain, otherwise rice production will have low yields."

Warnings misleading

Kang Chandararot, president of the Cambodia Institute of Development Study, said IMF and World Bank predictions for the Cambodian economy are misleading, as the international bodies were not familiar with the nation's financial nuances.

"I think the prediction by the government is more realistic than IMF forecasts because the government figures are based on practical statistics from the Ministry of Planning," said Kang Chandararot.

He added that economic growth would slow considerably next year due to weaker core export sectors, such as garments, which rely on demand from the US.

Lower exports would also reduce foreign investment in Cambodia, and the financial crisis would prevent tourism growth, he said. 

MOST VIEWED

  • Hun Sen’s China visit ‘a good opportunity’

    Prime Minister Hun Sen’s visit to Beijing on Sunday to discuss economic and trade issues presents a good opportunity for the Kingdom to strengthen Chinese ties and counter punitive measures by the West, an analyst says. The prime minister’s four-day official visit to

  • Former chief bodyguard receives royal pardon

    The former chief bodyguard of late Senate president Chea Sim has received a royal pardon nearly eight years after he was sentenced to 15 years behind bars on several charges, according to a royal decree dated November 12, last year, and obtained by The Post on Wednesday.

  • Close to the edge: Hair raising pictures from Kulen Mountain

    A new hair raising attraction on Kulen Mountain has finally opened to the public, with people flocking to the protruding cliff edge overlooking green mountainous forests to take photographs. The giant overhanging rock is situated in an area known as Mahendraparvata – an ancient city of

  • US warned not to interfere despite successful meeting

    A senior Ministry of National Defence official said the Tuesday meeting between the US Deputy Assistant Secretary of Defence for South and Southeast Asia Joseph H Felter and General Neang Phat had helped strengthen relations between the two countries’ militaries. However, a senior Cambodian People’