The Restrained Recovery report, World Bank’s latest economic update for Cambodia, was published today and projects the Kingdom’s economy to contract by 2 per cent in 2020, but is expected to grow by 4 per cent in 2021.
World Bank Country Manager for Cambodia, Inguna Dobraja, said: “Significant uncertainty remains to Cambodia’s growth outlook. The most important policy goal must be to urgently regain jobs lost and suspended due to the pandemic”.
The World Bank claims that there are signs that economic activity is beginning to pick up in Cambodia and outlines some key positives.
- Easing of social distancing measures has resulted in the domestic economic activity gradually returning to normal.
- Consumption is being partly underpinned by unprecedented government intervention.
- Inflation remains subdued.
- FDI (Foreign Direct Investment) inflows to projects in non-garment industries and agriculture have been rising, likely attracted by Free Trade Agreements.
- Exports of bicycles, electrical parts, and vehicle parts and accessories are rising
- Exports of rice and other agricultural commodities have surged.
- Domestic tourists have supported a partial recovery of the travel and tourism industry.
Dobraja added, “Looking ahead, it is essential that domestic and foreign investment are encouraged to take advantage of recent bilateral and regional free trade agreements. This would be possible through the prompt introduction of competitive investment law and incentive schemes, together with moves to improve the ease of doing business.”
What does the World Bank suggest for Cambodia?
To help the country quickly recover from the pandemic, the Restrained Recovery report recommends:
- Boosting pro-poor and growth-enhancing public investment including cash-for-work projects
- Promoting labour-intensive sectors to generate jobs by taking advantage of the quick recovery of domestic demand for consumer goods.
- Opportunities to facilitate an expansion of domestic and foreign investment arising from recent bilateral and regional free trade agreements, including the Cambodia-China Free Trade Agreement and Regional Comprehensive Economic Partnership (RCEP).
The Cambodia Business Pulse Surveys (BPS) conducted in June and September 2020 showed that “many businesses have re-opened since June. However, sales are still down significantly, especially for micro, small and medium-sized companies, and for firms in Siem Reap.”
COVID-19 vaccines in Cambodia
A “strong COVID-19 vaccine infrastructure, as well as closely monitoring economic vulnerabilities arising from the prolonged construction and property boom” are also recommended.
On December 15th, the Cambodian Prime Minister addressed vaccines in a public speech. Mr Hun Sen said his the government would follow the recommendation of the Ministry of Health to not use any vaccine that has yet to be approved by the WHO.
The government had received about USD $48 million and about $975,000 riels in donations for the purchase of the COVID-19 vaccine from over 38,411 philanthropists. In addition, the Cambodian government had received:
- $250 million loan from the Asian Development Bank (ADB).
- More than $238 million from the Japan International Cooperation Agency (JICA).
- $50 million from South Korea’s Economic Development Cooperation Fund (EDCF).
“We have already reserved a budget of between $100 million and $200 million to purchase COVID-19 vaccines under the [WHO-led] Covax initiative,” added the Cambodian Prime Minister.
Cambodia has 13 million people which requires 26 million doses of COVID-19 vaccines. A special warehouse will be constructed to store COVID-19 vaccines from 0 down to -80 degrees Celsius.
In the previous report from the World Bank in September 2020, they also predicted a -2 per cent contraction of the economy for 2020. The latest report from December 2020 can be viewed here.