The World Bank has revised its 2020 growth forecast for Cambodia to -2.0 per cent, as the Kingdom faces key COVID-19 economic struggles.
The World Bank suggests Cambodia’s main growth drivers (economic pillars) are struggling in the face of the COVID-19 pandemic. These economic pillars include construction, tourism, and merchandise exports.
- The construction and real estate boom relies heavily on foreign investment and this has seen some slowdown. Combined with steel and cement imports decreasing by 45.1 per cent and 8.2 per cent year-on-year respectively, in the first six months of 2020.
- Travel restrictions and lockdowns, means the Kingdoms tourism and hospitality sector have been severely affected. International arrivals fell by 64.5 per cent in the first six months of 2020.
- Cambodia’s manufacturing export sector has also faced challenges and the exports of the garments, travel goods and footwear products fell by 7.2 per cent during the first six months of 2020.
In May 2020, the World Bank predicted Cambodian growth figures at between -1 and -2.9 per cent. The Phnom Penh Post cites the latest report, saying “government fiscal intervention is unprecedented, amounting to five per cent of gross domestic product (GDP).”
This follows the Asian Development Bank (ADB) revision of its 2020 growth forecast for Cambodia to -4 per cent from -5.5 per cent. The ADB upped its revision saying Cambodia had “improved agricultural performance and an increase in volume in non-garment manufacturing exports such as bicycles and electronics.”
The World Bank was also recently critical of the Cambodian government’s strategy to develop the country’s eco-tourism sector. It said the government has not provided comprehensive guidance for eco-tourism.
“Most importantly, the current policies do not create incentives for private sector investments in ecotourism,” the report said according to the Khmer Times.
Aaditya Mattoo, chief economist for East Asia and the Pacific at the World Bank added that the government must be prepared for a post-COVID-19 economic recovery.
Reports on Cambodian agricultural exports have varied, but rice exports hit highs earlier in 2020.
Cambodia looks to diversify trade
One of the ways in which Cambodia is trying to diversify its economic outlook is by signing new trade deals. The Royal Cambodian Government is working secure a number of FTA (Free Trade Agreements) with China, India and Korea.
This should increase the FDI, employment and economic growth.
Cambodia has also been seeking Russian’s help for a Eurasian Economic Union (EAEU) free trade agreement to expand trade volume and economic cooperation between Cambodia and the bloc.