The World Bank’s biannual report on Cambodia was largely positive given dire economic prospects in Europe, which economists agreed were closely tied to the Kingdom’s key export sectors.

The report, released yesterday, predicted 6.6 per cent growth in gross domestic product compared to 2011.

That’s a tenth of a percentage point higher than the bank’s 2012 estimate in November last year.

Manufacturing is predicted to slow slightly this year, but the nature of Cambodian-made clothing may dodge some fallout from the continued sovereign debt crisis in Europe, which has been compounded recently by the threat of Greece’s exit from the European Union.

“That might be very well linked to many stores in the US and EU focusing on budget garments. And Cambodia is supplying some of those garments,” senior country economist Enrique Aldaz-Carroll said yesterday during a discussion on the report in Phnom Penh.

GDP growth in 2011 was also considerably higher than the World Bank predicted in November.

The economy expanded by 6.9 per cent, up from the 6 per cent predicted at the time.

The report noted that Cambodia has benefited from a shift in labour intensive industries from China to countries with lower wage costs, but economists said the country’s capacity to absorb new investments was not guaranteed.

Cambodian industry saw signs in 2011 that production was moving up the value chain.

Several assembly factories opened last year, although continued advances in the manufacturing sector would depend on boosts in education and training, bank economists said.

Price inflation would stay within the government target of 5 per cent this year, the report predicted.

Inflation cooled to a 4.9 per cent year-on-year increase in 2011.

To contact the reporter on this story: Don Weinland at [email protected]