Cambodia's economic outlook remains robust in the near-term despite the country set to face bigger external risks and potentially lose trade privileges to its main markets, an International Monetary Fund (IMF) team has told the finance minister.
An IMF team visited Phnom Penh earlier this month and met with Minister of Economy and Finance Aun Pornmoniroth to conduct interim discussions on recent developments and the outlook for the Kingdom’s economy.
It projected that Cambodia’s economic growth will remain between 6.5 and seven per cent in the near and medium term, thanks to better fiscal performance, the ministry said.
However, the IMF team warned that Cambodia is now subject to higher risks than before that could affect economic growth – including the potential loss of the EU’s Everything But Arms (EBA) scheme, a spillover effect of the China-US trade war and the UK’s decision to leave the EU.
“[The IMF team] also expressed their concerns with the increase in capital expenses . . . and the continued increase of credit to the construction and real estate sectors, which could lead to systematic risk to the financial sector, the ministry said.
It added that the team also favourably assessed the government’s efforts to remedy such issues by imposing measures, such as lowering electricity prices, adjusting the minimum wage and reducing the number of public holidays.
Realising the possibility of losing access to the EBA scheme, Pornmoniroth said the government has taken the issue into account for economic projection and has launched a series of reforms to prevent risk and to maintain economic growth at at least 6.5 per cent.
Prime Minister Hun Sen late last month announced large-scale economic reforms, outlining a 17-point strategy to stimulate economic growth that he said could save the private sector up to $400 million per year.
The strategy included a number of key money-saving initiatives for private businesses – including reducing costs associated with shipping, port service fees and electricity, as well as railway operation management reforms.
He said the reforms will allow Cambodia’s exports to remain competitive – even if the EU removes the Kingdom’s access to the EBA scheme.
The Asian Development Bank (ADB) early this month projected that the Kingdom’s economy will grow seven per cent this year, a slight decline from last year’s 7.3 per cent due to external factors.
With a slowdown forecast in advanced economies such as those in Europe, the US, Japan and China – major destinations for Cambodian exports – growth will likely slow for the Kingdom’s exports and its tourism sector, ADB’s Asian Development Outlook 2019 report states.