World Bank Projects​ 7% Cambodian Growth Rate

KHMER TIMES
SOK CHAN

The garment industry continues to prop up Cambodia’s economy. KT/Chor Sokunthea

The World Bank has projected the Kingdom’s economic growth will reach seven percent this year, slightly up from its 6.9 percent projection in April, due to solid garment exports and a resilient construction sector.

The World Bank’s “Cambodia Economic Update October 2016” highlighted solid garment export growth of more than 10 percent in the first half of the year and a continued resilience in the construction sector.

Although imports of construction materials dropped to about 20 percent in the first six months of the year compared to about 40 percent in the same period last year, steel imports rose to more than 40 percent compared to about five percent last year.

World Bank senior economist Ly Sodeith said that in April, the World Bank forecasted 6.9 percent growth for Cambodia’s economy due to a drought-hit agricultural sector and impacts from China’s slowdown, but the World Bank increased its prediction by 0.1 percent due to some positive signs including garment exports and the high demand for imported steel.

“In our previous prediction, we thought the construction sector would continue to fall, but until now it has seen strong growth, so we upgraded from 6.9 percent to seven percent,” Mr. Sodeith said.

Although the Kingdom’s economic growth remains healthy, Cambodia should aim to improve its competitiveness including transportation, infrastructure, skilled labor, cost of logistics, electricity and other administration services, and try to expand more market share to the global market, Mr. Sodeith said.

“Currently, most garment factories have been moving up the value chain in the garment industry by introducing washing, embroidery and printing to add value, which helps Cambodia remain competitive, so this effort will push them to have more market share in the world,” Mr. Sodeith said.

“Our garment export market share globally was 2.2 percent compared to about 0.9 percent in 2011,” he said.

Late last month, the Asian Development Bank (ADB) also described Cambodia’s economic situation in 2016 as “broadly as expected,” as it predicted a slight increase of 0.1 percent in economic growth to 7.1 percent.

An updated report to the ADB’s annual “Asian Development Outlook” for 2016 presents largely positive data and predictions for Cambodia, in line with government projections.

“The outlook for Cambodia’s economy, after attaining lower-middle-income status in July, remains robust with exports from the garment and footwear industry rising by 9.4 percent in the first half of this year,” the report says. “Better weather since June following an extended drought should help a mild recovery in agriculture.”

The World Bank report, however, also warns of risks to the Kingdom’s economic growth due to potential uncertainty related to upcoming elections, a sharp decline in the construction sector, fallout from rising US interest rates, regional tensions and slower global growth.

Chan Sophal, director of the Center for Policy Studies, told Khmer Times in August that though the country’s GDP was predicted to grow at a healthy seven percent, vigilance was needed to mitigate external risks due to a global slowdown.

“For the second half of this year or next year, there are some issues and risks [in the global economy] and we are not sure 100 percent whether those risks could affect the country,” said Mr. Sophal.