The World Bank expects further recoil on Cambodia’s gross domestic product (GDP) growth to between minus one per cent and minus 2.9 per cent for 2020 as its main growth drivers – tourism, manufacturing exports and construction – take a beating due to Covid-19, its latest economic update stated.
“Fiscal deficit could reach its highest level in 22 years and public debt is likely to rise to 35 per cent of GDP by 2022,” the report titled “Cambodia in the time of Covid-19” showed.
The latest GDP forecast, revised from 2.5 per cent in April and “slightly below seven per cent” earlier this year, is likely to register its slowest growth since 1994, the World Bank said.
The collapse of the three drivers, accounting for over 70 per cent of the country’s growth and nearly 40 per cent of employment, has hurt economic expansion, which puts 1.8 million jobs at risk.
Poverty could rise among households involved in key sectors including garment and trade by between three to 11 percentage points higher than at baseline (-1 per cent), or in the absence of Covid-19.
“Capital inflows are tapering and could in turn trigger the easing of real estate market prices, likely ending the construction boom,” the report warned.
As such, non-performing loans could rise on the back of large outstanding credit to the construction, real estate and mortgage sector.
“The global shock triggered by Covid-19 pandemic has significantly impacted Cambodia’s economy.
“We are committed to helping Cambodia deal effectively with the crisis and strengthen the economy for recovery and future resilience,” said World Bank country manager Inguna Dobraja.
In response to the Covid-19 shock, the bank recommended policy options that are aimed at providing urgent economic relief and public health protection in the immediate term, underpinning an economic recovery in the short-term and fostering macro-fiscal and social resilience in the medium term.
It also noted the emergency measures to contain the outbreak and provide fiscal assistance to affected households, workers and enterprises.
“To facilitate a robust recovery, the government will need to continue to ensure macroeconomic and financial sector stability and accelerate trade and investment reforms as well as encourage faster adoption of digital technologies,” it said.