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IMF predicts continued good growth for Kingdom

IMF predicts continued good growth for Kingdom

Cambodia is expected to continue its 7 per cent growth trend for 2015, driven by strong economic activity in construction, real estate and garments, an International Monetary Fund (IMF) representative said yesterday.

The announcement was part of a consultation process conducted by the IMF for its executive board, and pegged last year’s growth at 7 per cent, but warned that rapid domestic credit growth and a stronger dollar could have adverse effects going forward.

“I think it’s important to note that given the close relationship to the exchange rate to the US dollar, strengthening of the US dollar could potentially weigh on Cambodian exports,” said Sonali Jain-Chandra, the IMF’s deputy division chief for Asia and the Pacific.

The garment industry, one of the mainstays of Cambodian exports, was projected to show steady growth, but could potentially slow down given certain external factors.

“A protracted growth slowdown in Europe or a stronger dollar would constrain garment exports,” Jain-Chandra said.

“Any erosion of competitiveness could adversely affect exports and investment.”

As foreign direct investment needs increase in the Kingdom, the IMF said weak growth in China could have a domino effect on certain local sectors.

“Weaker than expected growth in China would have a spillover through the FDI, banking and tourism channels,” Jain-Chandra added.

Faisal Ahmed, representative for the IMF to Cambodia, said the booming sectors of real estate and construction were contributing to increasing jobs, but needed closer financial stability monitoring.

“So we see that the sector is buoyant. There’s a lot of interest,” Ahmed said. “[But] there are also concerns of oversupply.”

Hiroshi Suzuki, chief economist at the Business Research Institute for Cambodia, said the government and private sector should both be prepared to handle such low-risk possibilities.

“These issues are only ‘risks’ and the IMF sees only limited effect on the Cambodian economy,” he said.

The release noted that strong revenue performance coupled with GDP growth had reduced fiscal pressures, causing the current account deficit to fluctuate in the medium term.

Inflation was expected to climb to 2.6 per cent after falling early in the year due to falling global oil prices.

The forecast was lower than the Asian Development Bank’s estimate earlier this year, which said that the Kingdom would grow by 7.3 per cent this year and 7.5 per cent in 2016, but, hewed closer to the World Bank’s projection of 6.9 per cent.

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