The National Bank of Cambodia (NBC) said the Kingdom’s economic growth stagnated in the first half amid the Covid-19 blows to the global economy and forecast that gross domestic product (GDP) would contract 1.9 per cent this year.
Its governor Chea Chanto said the Covid-19 outbreak snowballed into a global health catastrophe and created an economic predicament eclipsing in severity the 2008-2009 Financial Crisis.
He noted that key pillars of the Kingdom’s economy such as tourism and manufacturing weren’t spared the sweeping impact of the pandemic.
“Although growth in other sectors declined, the agricultural sector saw slight increases while the financial sector also enjoyed gains,” he said.
The tourism sector was the worst affected of all major economic sectors as international arrivals took a sharp 55 per cent plunge in the first half of this year on a yearly basis, the NBC said in its Semi-Annual Report 2020 released on July 8.
In stark contrast, international arrivals increased 11.2 per cent in the first half of last year from the same period in 2018.
Chinese tourists topped the list, accounting for 22.7 per cent of foreign arrivals in the first four months. But Chinese arrivals took a substantial 71.4 per cent nosedive compared to the first four months of last year.
The manufacturing sector also shrunk by 11 per cent year-on-year due to disruptions tightening basic raw material supply, the NBC said.
The export-oriented manufacturing industry dipped 12.5 per cent. Garments were down 10 per cent, while footwear and travel goods were up two and eight per cent, respectively.
But production for the domestic market added 13.2 per cent, propped up by the rise in local consumption.
Meanwhile, it said, cracks emerged in the construction sector due to the rise in housing supply during the period despite the drop in demand from foreign residents.
At the same time, Covid-19-related disruptions led to construction material imports tumbling by 14 per cent, although public sector construction projects such as bridges, roads and expressways continued as scheduled.
Agricultural output increased by 21.7 per cent year-on-year owing to expanded cultivation area and a drop in natural disasters, the NBC said, highlighting that natural rubber yield climbed 9.2 per cent.
Freshwater and sea water fisheries yield took a slight dip, whereas fish and shrimp production in aquaculture farms saw huge gains.
Chanto noted that the Covid-19 predicament has shown no signs of slowing as of the end of the first half. Compounded with the escalating Sino-US trade war and flaring geopolitical tempers, it threatens to deepen global economic uncertainty.
Against this backdrop, he said, the Kingdom’s economy faces several risks to fiscal health, inter alia, the challenges posed by the possibility of partner countries withdrawing their trade preferences, slow economic diversification, low productivity and persistently high production costs.
“With all these challenges, Cambodia’s economy is expected grow negatively in 2020, at the lowest rate since 1995,” Chanto said.
Cambodia will be set to make a V-shaped economic recovery next year if the novel coronavirus can be contained by the end of the year, he said, noting that the growth rate would fall short of 2009 levels due to a slow recovery in the tourism, construction and real-estate sectors in the short-term.
The Kingdom registered a remarkably sound consumer inflation rate of 2.5 per cent due to the slow rise in food prices, slipping petrol rates and stabilisation of local currency against the US dollar, the NBC said.