Logo of Phnom Penh Post newspaper Phnom Penh Post - Tackle issues early to ensure growth: IMF official

Tackle issues early to ensure growth: IMF official

Tackle issues early to ensure growth: IMF official

Cambodia stands to benefit from an uptick in global and regional economic growth but will need to diversify its economy, improve infrastructure and reduce obstacles to doing business if it is to continue on its impressive growth track, a visiting International Monetary Fund (IMF) official said yesterday.

Speaking at the Royal University of Law and Economics in Phnom Penh, IMF Deputy Managing Director Mitsuhiro Furusawa said the global economy was gaining momentum after nearly a decade of sluggish growth. Higher growth in the US and stronger indicators in Europe, as well as continued rapid growth in Asia, have prompted the IMF to revise upward its regional and global forecasts, he said.

Accordingly, the IMF expects world economic growth, which stood at 3.4 percent last year, to accelerate to 3.5 percent this year and 3.6 percent in 2018. Growth in Asia is expected to reach 5.5 percent this year on improved outlooks in China and Japan.

Furusawa said the improved growth prospects present both an opportunity and a challenge for Cambodia. He said to capitalise on them, the Kingdom must diversify its economy and wean its reliance on low value-added garments. Failing to do so could see its GDP growth slow to 6.25 percent in the medium term, from the projected 7 percent this year.

He said Cambodia had positioned itself as a low-cost destination for garments manufacturers, but the footloose industry was highly susceptible to rising wage and production costs.

“Cambodia’s recent success as a clothing maker has benefited from China’s rising labour costs, and its transformation towards higher value-added production,” he said. “However, as your wages and other costs rise, there will be countries happy to lure your garment factories away. Competition in this market is tough.”

Furusawa said the Kingdom faced several challenges to its medium-term growth, namely shortcomings in infrastructure, “sometimes burdensome” government procedures that complicate doing business, and a need to improve governance. However, he said the government’s Industrial Development Policy, which aims to upgrade Cambodia’s industrial structure from a labour-intensive production base to a skills-driven one by 2025, could tackle many of these issues.

“If implemented in timely and effective fashion, this policy could promote diversification and sustained growth,” he said.

The senior IMF official also saw challenges in Cambodia’s “underdeveloped” financial system, where rapid credit growth has exposed vulnerabilities in the banking industry. He expressed concern over industry’s heavy exposure to the real estate sector, over-reliance on foreign borrowing and the rapid growth of microfinance institutions.

Moreover, he said the high level of dollarisation limits the government’s policy actions to respond to the situation.

Furusawa stressed that it was important that the government addresses these issues now rather than wait until an economic slowdown or external shock.

“These issues may appear to pose less risk at this moment of strong growth, but they can become more critical if circumstances change – here in Cambodia or in the outside world,” he said.

MOST VIEWED

  • Angkor lifetime pass, special Siem Reap travel offers planned

    The Ministry of Tourism plans to introduce a convenient, single lifetime pass for foreign travellers to visit Angkor Archaeological Park and potentially other areas. The move is designed to stimulate tourism to the culturally rich province of Siem Reap as the start of the “Visit

  • Bosba: The first Khmer woman composer from UK’s Cambridge

    Bosba Panh is just 25 years old, but she’s already accomplished some impressive milestones for herself and the Kingdom. On July 24, she graduated with a Master’s degree from the University of Cambridge as the first Khmer woman composer and Khmer music graduate ever at

  • Pailin longan winery tries to break through to the big time

    Longan aren’t quite as glamorous as some fruits. They don’t have the star-power of mangos or generate the excitement of a pricey seasonal niche fruit like the pungent durian. Unlike bananas or oranges, which are known and loved everywhere, longan remains a decidedly

  • Debt restructuring over, time to tackle rising NPL ratio

    The Cambodian banking system has just completed a 26-month debt restructuring exercise where scores of loan accounts were revised, classified and provisioned as the rate of non-performing loans inched up, sparking a slight credit risk unease Implemented in April 2020, the Covid-19 debt restructuring measures came

  • Recap of this year’s ASEAN FM meet and look ahead

    This year’s edition of the ASEAN Foreign Ministers’ Meeting (AMM) hosted by Cambodia comes against the backdrop of heightened global tensions and increasing rivalry between major powers that have been compared to the animosity of the Cold War era. The following is The Post’

  • ‘Golden’ Angkor Wat likely due to natural phenomenon: ANA

    Pictures and video clips of the Angkor Wat temple, its spires seemingly coated in gold, have been shared tens of thousands of times on social media, prompting a sense of wonder among those who have seen them. Hong Sam Ath, who took the pictures and