Growth will slow and foreign reserves decline as crisis deepens
CAMBODIA'S economy will come under intense pressure in 2009 as tourism, garments and construction take a hit from the global slowdown, said the International Monetary Fund in a report this week.
"Cambodia's exceptional growth performance ... is coming under increasing strain from the global economic crisis and weakening external demand," said the annual report.
Foreign direct investment will decline and foreign reserves could fall to about US$1.9 billion, it said.
"Cambodia could experience a pronounced liquidity contraction and possible large reserve loss," the report says.
It predicts 4.8 percent growth in 2009, but IMF Resident Representative John Nelmes warns that the projection will be downgraded. "We are taking a close look at the growth projection.... Since November, when the projection was made, the global crisis has intensified," he told the Post Wednesday.
A UK-based emerging markets expert said that the IMF assessment is late coming. "The problems were apparent in autumn when there were large withdrawals of capital from the developing world because of worries over the credit risks." said Vanessa Rossi, senior research fellow at Chatham House. She said that the crisis is only beginning for countries like Cambodia. "[Analysts] haven't allowed for the fact that countries like Cambodia are dependent on foreign capital inflows.... If things don't improve soon, they will need an IMF bailout."
Opposition leader Sam Rainsy said that the findings are no surprise. "The IMF seems to share my concerns and the views I have expressed.... We cannot afford to do nothing as the Cambodian government is doing right now," he said.