Cambodia's economy is projected to return to four per cent growth next year, the World Bank said, citing an improvement in economic activities and the effective implementation of the government’s intervention measures to keep the economy afloat amid Covid-19.
But it kept its September projection for the Kingdom’s economic contraction this year at two per cent, according to Restrained Recovery, the World Bank’s latest economic update for Cambodia published on December 16.
Economic activity in the Kingdom is gradually returning to normal levels as social-distancing measures are relaxed, the Washington, DC-based multilateral lender said.
It said: “Consumption is being partly underpinned by unprecedented government intervention, while inflation remained subdued. FDI [foreign direct investment] inflows to projects in non-garment industries and agriculture have been rising, likely attracted by free trade agreements.
“Although total manufacturing exports have been hit by the pandemic, exports of bicycles, electrical parts, and vehicle parts and accessories are rising, and exports of rice and other agricultural commodities have surged. Domestic tourists have supported a partial recovery of the travel and tourism industry.”
World Bank country manager for Cambodia Inguna Dobraja said Covid-19 has created a need to scale up job creation and stem the unemployment tide.
She said: “Significant uncertainty remains to Cambodia’s growth outlook. The most important policy goal must be to urgently regain jobs lost and suspended due to the pandemic.
“Looking ahead, it is essential that domestic and foreign investments are encouraged to take advantage of recent bilateral and regional free trade agreements.
“This would be possible through prompt introduction of a competitive investment law and incentive schemes, together with moves to improve the ease of doing business.”
Ministry of Economy and Finance spokesman Meas Soksensan echoed the World Bank’s assessment that government intervention efforts have helped stabilise the economy to maintain its projected 1.9 per cent contraction.
He said: “The government is very pro-active in its response to the impact caused by Covid-19, dealing with it in an immediate way. This builds confident among investors as evident in the still-robust investment and business climate.
“Other barriers impeding investment and business growth have been swiftly handled by the government, leading its trajectory along an improved path.”
Royal Academy of Cambodia economic researcher Hong Vanak said the government’s stimulus packages and relief funds to help the Kingdom’s small and medium-sized enterprises (SMEs) have been very timely.
He said: “We’ve seen the government ramp up efforts and launch many rounds of measures to stimulate not only economic activities but also social welfare. These aim to ensure that the SME sector remains vibrant and that the people can still make a living.”
To quickly recover from the pandemic and ensure a return to growth next year, the World Bank recommends in its report that Cambodia pursue a number of key measures.
The Kingdom must boost “pro-poor and growth-enhancing public investment including cash-for-work projects” and promote “labour-intensive sectors to generate jobs by taking advantage of the quick recovery of domestic demand for consumer goods”, the lender said.
It must also provide “opportunities to facilitate an expansion of domestic and foreign investment arising from recent bilateral and regional free trade agreements, including the Cambodia-China Free Trade Agreement and Regional Comprehensive Economic Partnership”, it added.
It also recommended a “strong Covid-19 vaccine infrastructure, as well as closely monitoring economic vulnerabilities arising from the prolonged construction and property boom”.