Despite a slower-than-anticipated rise in agricultural production, Cambodia’s economy is expected to grow at 7 percent this year on the back of strong growth in traditional sectors like garments, tourism, trade and construction, according to the latest forecast by the Asian Development Bank (ADB).
The bank said growth in the garment and footwear industries was strong following a surge in production. ADB forecasts that the sector will grow at 10.6 percent in 2019, up from its previous forecast of 10.1 percent.
However, ADB warned that national growth could contract to 6.8 percent in 2020.
Citing climate change risks, the bank noted that agricultural growth dipped to around 1.1 percent this year as a result of droughts that have decreased agriculture and fisheries production in the first half of the year.
“With increased uncertainty in the global trading environment and its impact on services such as tourism, Cambodia urgently needs a focused diversification strategy into niche and higher-value products and services,” said ADB country director Sunniya Durani Jamal in a statement today.
This will require reducing risks emanating from lending to an overheated real estate sector, developing a more skilled and productive workforce to justify rising wages, and attracting high-quality capital investment, all of which will need stronger governance and institutions.
ADB said faster-than-anticipated growth in imports and tourist arrivals is expected to widen the current account deficit, excluding official transfers.
The deficit is financed by buoyant foreign direct investment inflows that are expected to build up the gross international reserves to around $12.3 billion by the end of the year, providing six months of import cover.