Cambodia GDP Growth Forecasted at 6.5%

2012-04-11
Source: Xinhua

The Asian Development Bank ( ADB) predicted that Cambodia’s Gross Domestic Product (GDP) will grow 6.5 percent this year, 0.3 percentage point lower than that of 6.8 percent last year, due to the sluggish economic growth in Europe and the United States, according to the Bank’s Outlook 2012 Update released on Wednesday.

The ADB forecast is the same as the predictions by the International Monetary Fund and the World Bank, but lower than the 7 percent forecast by Cambodian government.

The report said that the country’s export-led sectors, including garment and footwear will remain the main sources of growth this year, with some new manufacturing industries beginning to emerge, such as automotive parts and assembly of small electric motors.

“The subdued economic outlook for the EU and the United States, Cambodia’s main export markets, suggests that GDP growth will edge down to 6.5 percent in 2012,” it said, adding that in 2013, growth is seen picking up to 7 percent, tracking the expected upturn in the global outlook.

“Despite the worst floods last year in more than a decade and high levels of uncertainty and recession in the global environment, Cambodia is expected to exhibit healthy economic growth over the next two years,” said ADB Deputy Country Director and Senior Country Economist for Cambodia Peter Brimble.

“However, mismatches in the human capital and skills markets, which have intensified over the past few years, highlight the need to bring schools and vocational training institutes closer to the business community, in order to promote quality and relevance to market demand.”

Cambodia’s economy is supported by four key pillars, including garment exports, tourism, agriculture and real estate.

The expected slowdown in 2012 reflects falling industry exports with only slight increases in the growth of the services and agriculture sectors. Growth in industry driven by exports of garments and footwear to the United States and the EU is projected to slow to 11.4 percent from 13.9 percent the year before.

It added that construction is expected to strengthen, stimulated by foreign direct investment in property. The extent and timing of exploitation of oil and gas reserves in Cambodia remain unclear, but it is not anticipated to have an impact on GDP before 2015.

Growth in services is expected to edge up to 5.3 percent in 2012 from 5 percent last year. Agriculture, which was disrupted by the flooding in late last year, is forecast to grow by 3.8 percent, up from 3.3 percent, assuming favorable weather.

The report forecast that the country’s inflation in 2012 and 2013 is forecast to ease to about 5 percent on a year-average basis, from 5.5 percent last year. However, rising global oil prices early in 2012 may put the inflation forecast at risk, said Peter.