Logo of Phnom Penh Post newspaper Phnom Penh Post - Growth rate down; chins up

Growth rate down; chins up

Growth rate down; chins up

Depending on which economic forecast you believe, Cambodia's economy has either

"improved considerably" or the country is in the midst of a fiscal downturn.

The World Bank and the Economic Institute of Cambodia (EIC) issued independent -

and divergent - figures on November 3 at the release of the World Bank's East Asia

Update, a twice-yearly economic survey of East Asia and the Pacific.

Economists at the World Bank placed Cambodia's growth rate for 2005 at 6.1 percent,

down from 7.7 percent in 2004. Rob Taliercio, the Bank's senior economist in Cambodia,

maintained that figure was "encouraging," and attributed the decrease to

external factors such as high oil prices and increased competition in the global

textile market.

Nisha Agrawal, country manager for the World Bank in Cambodia, also warned that without

a national policy on energy costs, Cambodia's private sector could face serious challenges

in the future.

"[The high cost of energy] is one of the major constraints...to growth in the

private sector," Agrawal said.

However, in a report released on November 3 but dated October, the EIC forecast a

growth rate of only 5 percent, down from last year's 7.7 percent.

Though EIC analysts acknowledged the challenge presented by high oil prices, the

report also included soaring import costs, drought and lagging government reforms

reasons for the slowdown. It warned that Cambodia's strong economic performance over

the last decade was not enough to both maintain growth and reduce poverty in the

future - especially in rural areas.

While both reports indicate downward pressure on economic growth, the EIC viewed

the figures as a downturn, while Taliercio said Cambodia's economic prospects had

"improved considerably," mostly as a result of restrictions to Chinese

textile exports.

Addressing the disparity between the two projections, Taliercio noted that the EIC

projected a slower rate of growth in the textile industry.

The World Bank's regional report indicated that East Asia grew at just over 6 percent

in 2005 - down from 7.2 percent last year - as the region wrestled with rising interest

rates, high oil prices, a slowdown in the high-tech sector and the shakeup in the

textile industry.

Economists reported that poverty continued to fall in most parts of East Asia, as

the number of people living on under $2 a day dropped to 32 percent in 2005, down

from 60 percent in 1996.

Agrawal noted that an upcoming assessment of poverty in Cambodia would reveal a similar

downward trend. She said unpublished results from the Cambodia Socio-Economic Survey

reveal that 35 percent of Cambodians live in poverty, down 12 percent from 1993.

The full report will be released later this year, in the government's draft National

Strategic Development Plan (NSDP) for 2006-2010

She said the new data shows that the growth has also translated into poverty reduction

and improved human welfare.

The authors of the World Bank report also expressed concern at the threat of an avian

flu pandemic and its consequences for economies in the region.


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