As the Covid-19 pandemic continues its grim march across the world, national leaders are designing stimulus packages to mitigate the risks facing their economies and social welfare systems.
In Cambodia, the government has introduced the $2 billion fourth round of stimulus measures aimed at ensuring economic and social stability. The move is designed to help businesses, factories and enterprises – especially small and medium-sized enterprises – to stay afloat while reducing the burden on poor people through social assistance programmes.
Claire Honore Hollweg, senior country economist for the World Bank in Cambodia, sat down with The Post’s May Kunmakara to discuss the impact of the pandemic, local government’s policy response and the World Bank’s role in assisting national leaders around the globe.
What is the World Bank’s overview of Cambodia’s economy in the age of Covid-19, given its high degree of reliance on exports?
Like other countries in the region, Cambodia is an open economy to international trade and investment. Growth and global integration have gone hand in hand, where growth has been sustained by high exports of goods and services (including tourism) and steady flows of foreign capital.
The global shock triggered by the Covid-19 pandemic is being propagated through falling global demand, supply chain disruptions, financial market volatility and lower domestic economic activity. It has significantly impacted Cambodia, hitting hard most of Cambodia’s main drivers of growth.
After facing shortages of raw materials, the garment industry is now facing a global demand shock amid declining export orders. The tourism sector has been hit hardest by the outbreak, where international arrivals have fallen dramatically.
There are signs that the construction and real estate sectors, which rely heavily on foreign direct investment, have also slowed.
What is your take on the government’s fiscal response focusing on giving new impetus to the Kingdom’s most affected sectors, such as garments, tourism, and aviation?
In the absence of significant mitigation measures, the Covid-19 pandemic threatens to reverse years of development gains in Cambodia. The government is responding through targeted support to manage the current impact in affected sectors and to ensure economic and social stability.
Tax incentives will help provide immediate relief to firms in key economic sectors affected by the Covid-19 crisis to help weather the storm and maintain employment levels of their staff.
But they are only one component of the broader reform package that provides timely and targeted relief to the affected population that also includes households and workers.
And what is your take on the government’s Social Relief Programme in the pipeline which is said will transfer some money to the most affected or vulnerable households, provide short-term training and reskilling programmes for affected workers, and allow them to run small businesses?
During times of economic downturn, as the current one, strong social assistance measures can help prevent people from falling into poverty. We agree that the government measures to help the most affected people are the right thing to do for the immediate economic relief and public health projection.
Development of a crisis-adaptive social assistance system is similarly a hallmark of a resilient economy, and social assistance and training and reskilling, in addition to mitigating immediate shocks, can promote human capital development, bolstering long-term productivity and growth.
What policies does the World Bank recommend to support the economy in the post-Covid-19 world, and what has it done to help thus far?
The report recommends that policy options in response to the Covid-19 outbreak aim to provide immediate and urgent economic relief and public health protection, underpin an economic recovery in the short term, and foster macro-fiscal and social resilience in the medium term.
The World Bank is supporting Cambodia to effectively deal with the Covid-19 crisis and strengthen the country’s economy for recovery and future resilience.
Recently, the World Bank approved and reviewed several projects to assist Cambodia in its efforts to prevent, detect and respond to the threat posed by Covid-19 and strengthen national systems for public health preparedness.
What is the World Bank’s projection for Cambodia in 2020-2021?
While real gross domestic product (GDP) growth was strong at 7.1 per cent in 2019, the global outbreak caused sharp decelerations in Cambodia’s main engines of growth in the first quarter of 2020.
Real growth is forecast to contract sharply to minus one per cent in 2020, compared to the earlier projection of 6.8 per cent, due to contractions of merchandise exports and tourism flows and slowed construction activity.Improvements in economic activity in major markets expected in 2021 should improve Cambodia’s growth outlook next year, which is projected to increase to 6.0 per cent.
This interview has been edited for length and clarity.