In 2019 the Kingdom’s economy will grow at a rate of 7 percent, according to the nation’s Central Bank, who noted in its latest report that such growth may be weakened by a number of internal and external factors, including the potential cancellation of the Everything-but-arms (EBA) scheme with the European Union.
The National Bank of Cambodia (NBC) has forecasted robust economic growth in 2019, just marginally lower than last year, when, according to the government, it reached 7.3 percent.
Its report on the state of the Kingdom’s economy and the local banking sector in 2018 and 2019, released Wednesday, said this year the inflation rate will remain at 2.6 percent, while foreign reserves are expected to reach $11.3 billion.
Uncertainty regarding Cambodia’s EBA scheme with the EU and the implementation of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) are listed by NBC as possible risks to achieving 7 percent growth.
The report also mentions the possibility of new free trade agreements between with the United States or the EU and countries that directly compete with Cambodia in trade, which would also limit the Kingdom’s economic expansion in 2019.
As for internal risks, one of the biggest worries is an overreliance on the construction sector for growth, which is also burdened by high credit growth. By the end of the year, credit in the construction sector is expected to grow at 31 percent.
Other internal factors are high production costs, small economies of scale, limited access to power, the high cost of electricity and a minimum wage in the garment sector that continues to increase every year.
“To face these threats, the Central Bank will work alongside the government to reform and diversify the economy, provide a favorable investment environment, and develop the economic sector efficiently,” the report noted.
“NBC will work to strengthen trust and develop the banking system efficiently while stabilising prices in line with our development strategy for the financial sector for the years 2016–2025.”
Aun Pornmoniroth, the Minister of Economy and Finance, told Khmer Times that trade has been instrumental in achieving a 7.3 economic growth rate in 2018.
He said Cambodia now exports to 147 countries, with international shipments representing more than 60 percent of the country’s gross domestic product (GDP). At the same time, Cambodia now buys from 135 countries, with exports last year valued at $13 billion.
“We hope to see more cooperation among key actors, including ministries, officials at all levels, and the private sector to enable the fourth phase of the government’s Rectangular Strategy to be a success in the sixth mandate, and to have a very productive 2019,” Mr Pornmoniroth said.
In its report, NBC projects credit growth in the banking sector to reach 17.1 percent, adding that financial inclusion will continue to grow, helping to reduce poverty.
In Channy, president of Acleda Bank, one of the largest commercial banks in the Kingdom, told Khmer Times he expects 2019 to be a great year for Cambodia’s financial sector.
“We still have the three most important factors: economic, social and political stability, which are fundamental for growth in the financial sector.
“2019 will be one of the best years for Acleda Bank since, according to government and World Bank projections, the economy will continue to grow at a very fast pace,” said Mr Channy.
According to the Central Bank’s six-page analysis, in 2018, the garment, construction, and tourism sectors experienced double-digit growth, while foreign direct investment expanded by 12 percent, mostly, going into the banking, real estate, and garment sectors. This contributed to expanding the balance of payment surplus to 4.5 percent of GDP.