Cambodia's economy is projected to grow by just 1.9 per cent this year due to the protracted Covid-19 crisis, but accelerate to 5.5 per cent by 2022, according to the latest update of the Asian Development Bank (ADB) released on September 22.
The Manila-based lender downwardly revised its April forecast of 4.0 per cent for this year, but held its projection for 2022.
ADB country director for Cambodia Sunniya Durrani-Jamal said the lockdown and temporary shutdown of factories affected production in the garment, travel products and footwear sectors earlier this year, adding that the lingering epidemic is affecting local services and demand.
According to the Asian Development Outlook Update 2021, the agricultural sector is expected to grow by 1.5 per cent. A domestic outbreak of Covid-19 has disrupted the agricultural supply chain, but its impact has been generally limited.
Agricultural exports rose 30.3 per cent in the first half of 2021 from a year earlier, with strong growth in non-milled rice crop exports.
Domestic demand for food, accommodation, transportation and other personal services was severely affected by the outbreak of Covid-19 and lockdown. Restrictions on international travel remain in place, and international arrivals plunged by 91.3 per cent year-on-year in the first half of 2021. The services sector is anticipated to shrink by 0.6 per cent this year.
Exports of garments, travel products and footwear in the first half of 2021 were below pre-Covid levels, but still above 2020 figures. Other production continued to grow and construction activity began to recover, with imports of construction materials up 23.5 per cent year-on-year in January-June.
Industrial growth is projected at 5.3 per cent this year, driven by the possibility of increasing exports of garments, travel products and footwear and the resumption of strength in other manufacturing sectors.
In a September 21 message on the occasion of the International Day of Peace, Prime Minister Hun Sen presented a rosier 2.5 per cent growth outlook for 2021 despite persistent challenges presented by Covid, noting that the economy contracted by 1.9 per cent last year.
The government has been gearing to launch the Post-Covid-19 Economic Recovery Plan 2021-2023, aiming to lift the economy out of the pandemic rut and chart a course for sustainable and inclusive growth, based on three priority strategies – “economic recovery”, “reforms” and “building resilience”, according to Minister of Economy and Finance Aun Pornmoniroth.
“Economic recovery”, the first of the three priority strategies, entails building a strong foundation to move the economy back into growth territory, with a focus on safety, impact management, the revival and stabilisation of viable businesses – especially in the most affected sectors – and the rapid creation of new jobs, Pornmoniroth said.
“Reforms” covers the continued introduction of key reform measures, as instruments designed to improve, among other things, trade facilitation, investment and business, promotion apparatuses and digitalisation in economic systems used in the public and private sectors, he said.
“Building resilience” involves strengthening preparedness and response capacity to disease outbreaks or similar public emergencies that could emerge in the future, and focuses on the development of solid health and social protection systems, effective social intervention programming, and ensuring the sustainability and inclusivity of socio-economic rehabilitation and development, he added.
ADB said the government has taken steps to reduce the impact of the epidemic on the economy and society. These include the provision of free vaccines and treatment for Covid-19, cash assistance to poor households, economic incentives and loan restructuring.
Durrani-Jamal said that in order to improve people’s livelihoods and sustain economic growth, the government will continue to strengthen its social protection system and enhance the quality of health care and education services.
“Further reforms are also needed to attract investment in high-quality infrastructure, including digital infrastructure. Reforms to improve the performance of public functions are also fundamental to improving the country’s international competitiveness,” she said.