Cambodia’s economy will continue to experience robust growth, but will expand at a slower pace than last year due to weaker external demand, the World Bank concluded in a report released yesterday.
In 2019, the Kingdom’s economy will grow at 7 percent, easing from 7.5 percent last year, the World Bank said in its East Asia Pacific Economic Update. The slowdown is the result of concerns regarding high energy tariffs and logistics costs in the country coupled with concerns surrounding the unskilled workforce, the World Band suggested in the report.
Cambodia’s long-term outlook depends on the country’s ability to absorb rising foreign direct investment (FDI) inflows while promoting domestic investment, it said.
Cheaper energy and logistics costs, availability of skilled workforce, and improved supply chain linkage will be essential to remain competitive.
“We expect global trade to slow down this year. Moreover, unlike last year when the country experienced fiscal expansion, in 2019 the government underwent fiscal consolidation. All in all, we expect growth this year to be slower than the last,” said Ly Sodeth, senior economist at the World Bank in Cambodia, during a press conference held yesterday in Phnom Penh to present the report.
The European Union in February started the process that could lead to the potential suspension of Cambodia’s preferential access under the Everything-but-arms (EBA) scheme. The EU market currently accounts for more than a third of Cambodia’s key exports including garments, footwear, and bicycles.
“Losing EBA preferences, which currently provide Cambodia duty-free and quota-free access to the EU, would likely result in slower export growth,” the report said.
The report also addressed the relation with China. “Given Cambodia’s heavy reliance on capital inflows from China, a sharp slowdown in the Chinese economy could dampen growth prospects.”
Speaking at the same conference, Andrew D. Mason, acting chief economist for East Asia and the Pacific at the World Bank, said Cambodia has to overcome this challenges to continue experiencing high growth in years to come.
“Looking ahead, it would be important for Cambodia to continue to strengthen its competitiveness in the global market in order to maintain a high growth rate in the future,” Mr Mason said.
“This means it must strive to reduce the cost of doing business, improve the business environment, and, most importantly, strengthen its human capital and the skills of its labour force.
“In the short term, I would say, it is not worrying that we see a slight decline in national growth. Cambodia is facing important challenges when it comes to strengthening the business environment and strengthening the skills of its population so that it can move up the value chain and transition to an upper-middle income economy,” Mr Mason added.