World Bank’s new forecast analysis show that Cambodia’s economic growth this year will go down to 2.2 percent, but will recover to 4.5 percent next year, and 5.5 percent in 2023.
Cambodia is experiencing a resurgence of COVID-19 cases which has slowed the recovery, especially of the service, construction, and real estate sectors. The growth projection for 2021 is now revised down to 2.2 percent, despite strong export performance supported by improved external demand conditions.
“Cambodia’s outlook remains highly uncertain and risks are tilted to the downside. Despite accelerated vaccination progress, risks of a protracted outbreak and further disruption remain high, given continued high numbers of infections and deaths,” it underlined.
World Bank said Cambodia is experiencing a resurgence of COVID-19 cases, caused by the more transmissible Delta variant. Infections and deaths have risen quickly. The outbreak which has lingered since the second quarter of 2021 has slowed the recovery, especially of the service, construction, and real estate sectors. The important travel and tourism sector, which was estimated to have provided about 2 million jobs and contributed a quarter of GDP during the pre-pandemic period has virtually collapsed. Job losses have been magnified by an increased number of migrant workers who have returned home from abroad.
According to a High Frequency Phone Survey of Households, employment and income had not recovered to their pre-pandemic levels even before the recent COVID-19 resurgence. About 69 percent of households’ main earners were employed in March 2021, 13 percentage points lower than the level before the pandemic. About 45 percent of households continued to experience income losses in March 2021. Disruptions to economic activities due to stringent measures to curb the outbreak have led to job losses or decreased working hours, in turn reducing household incomes. School closures have disrupted education since late March 2021, especially for poor students who have limited access to digital technologies.
Risks are tilted to the downside and Cambodia’s outlook remains highly uncertain. Despite accelerated vaccination progress, risks of further disruptions remain high, given continued high numbers of infections and deaths. In addition, high credit growth and concentration of domestic credit in the construction and real estate sector remains a key risk to Cambodia’s financial stability.
Thanks to improved external demand conditions, merchandise (excluding gold) exports have strengthened further, expanding at 17 percent y/y during the first seven months of 2021, driven partly by a recovery of garment, footwear, and travel goods (GFT) exports which account for 63.1 percent of total exports. The United States remains the largest exports market, capturing 42.3 percent of Cambodia’s total GFT exports. The trade deficit has widened, largely caused by rising imports of a few major items (fabric used as inputs for garment production and exports, gold used as a hedge against volatility, and petroleum products), resulting in a widening of the current account deficit, which was partly affected by a decline in services (travel and tourism) exports. While remaining subdued, inflation has edged up, reaching 3.3 percent y/y in July 2021, compared to 3.1 percent at the end of 2019. Nominal exchange rate was broadly stable, hovering around 4,100 Riel per U.S. dollar during the first half of 2021. Gross international reserves declined marginally to $20.7 billion (9 months of imports) in May 2021, down from $21.2 billion at the end of 2020.
Besides, Cambodia, the East Asia and Pacific region’s recovery has been undermined by the spread of the COVID-19 Delta variant, prolonging the distress for firms and households, likely slowing economic growth and increasing inequality, the World Bank said on Monday.
Economic activity began to slow down in the second quarter of 2021, and growth forecasts have been downgraded for most countries in the region, according to the World Bank’s East Asia and Pacific Fall 2021 Economic Update.
This article was first published in Khmer Times. All contents and images are copyright to their respective owners and sources.
