The Cambodian economy is projected to slow slightly this year compared to last year, despite robust growth of around seven per cent, an Asian Development Bank (ADB) report released on Wednesday said.
ADB said economic expansion last year hit 7.3 per cent on the back of a hefty increase in exports, buoyant tourism and a strong continuous inflow of foreign direct investment.
With a slowdown forecast in advanced economies such as those in Europe, the US, Japan and China – major destinations for Cambodian exports – growth will likely slow for the Kingdom’s exports and its tourism sector, the ADB’s Asian Development Outlook (ADO) 2019 report states.
“A growth rate of seven per cent is still very good. But I think we had better focus less on numbers and more on the quality of growth, the sustainable growth, which is very important,” ADB country director for Cambodia Sunniya Durrani-Jamal said.
“A key driver of growth in the future will be improving the quality of Cambodia’s human capital, including technical and vocational skills, to meet the demand of the private sector,” she said.
Impacts of global shutdown
Industry and construction are expected to feel the adverse effects of the weakening external environment the most, ADB said. Growth in industrial output is likely to ease from an estimated 10.8 per cent last year to 10.1 per cent this year.
Growth in services is expected to moderate slightly, from 6.9 per cent in 2018 to 6.8 per cent this year. The agricultural sector is projected to grow 1.7 per cent, while the service sector is set to grow 6.8 per cent.
In terms of external challenges that could affect economic growth this year, ADB highlighted a global economic slowdown that could be sharper than expected. The EU is also discussing the possibility of suspending Cambodia’s access to its Everything But Arms scheme.
As for internal risks, high credit growth and a concentration in the real estate sector pose risks to financial sector stability. Another key risk is a likely drought this year.
The ADO 2019 report highlights the critical challenge of the so-called skills gap, which is caused by a mismatch between skills supplied by the existing workforce and those demanded by employers.
Cambodia Chamber of Commerce vice-president Lim Heng on Wednesday said the economy would maintain strong growth at at least the same level as last year, thanks to government plans for large-scale economic reforms as outlined on Friday in a 17-point strategy to stimulate economic growth.
The internal reforms will help strengthen national competitiveness, and reduce the costs associated with shipping, port service fees and electricity, as well as introduce fiscal incentives on tax and customs and excise, Heng said.
“The reforms will attract a further inflow of foreign direct investment and boost Cambodia’s export competitiveness. These will serve as the key driver to accelerate economic growth this year and in the years to come,” he said.