The World Bank (WB) has maintained its economic projection for Cambodia at 5.2 per cent in 2023, crediting China’s economic reopening, but noted that regional economies could be hurt by “slowing global growth, elevated commodity prices, and tightening financial conditions in response to persistent inflation”.
“Growth in developing East Asia and the Pacific [EAP] is forecast to accelerate to 5.1 per cent in 2023 from 3.5 per cent in 2022, as China’s reopening helps the economy rebound to a 5.1 per cent pace from three per cent last year,” the multilateral lender said in a March 30 statement.
The Washington-based institution defines the developing EAP region as the 10-nation ASEAN’s eight largest countries – Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Thailand and Vietnam – along with China, Mongolia, Papua New Guinea, Timor-Leste, and the Pacific island countries.
“Growth in the region outside China is anticipated to moderate to 4.9 per cent from the robust post-Covid-19 rebound of 5.8 per cent in 2022, as inflation and elevated household debt in some countries weigh on consumption,” the statement said.
The WB’s April 2023 EAP economic update added: “While output has surpassed pre-pandemic levels in most of the larger EAP economies, recovery has been uneven across the region.
“By the end of 2022, Cambodia, Indonesia, Lao PDR, Malaysia, Mongolia, the Philippines, and three Pacific Island countries – Nauru, Kiribati and Papua New Guinea – had also exceeded pre-pandemic levels of output,” it said.
World Bank EAP vice-president Manuela V Ferro said in the statement that “most major economies of East Asia and the Pacific have come through the difficulties of the pandemic but must now navigate a changed global landscape.
“To regain momentum, there is work left to do to boost innovation, productivity, and to set the foundations for a greener recovery.”
On January 25, Ministry of Economy and Finance permanent secretary of state Vongsey Vissoth revealed that the government had revised down its 2023 growth forecast for the Cambodian economy to 5.6 per cent versus the 6.6 per cent it put forth in October, citing uncertainty about global economic growth tied to the Ukraine conflict, climate change and the Covid-19 crisis.
Although fallout from Covid-19 has subsided, the Ukraine crisis and climate change will put significant downward pressure on global economic growth, with the US, EU, China and other major buyers of Cambodian goods facing particularly grim prospects, he stated.
The latest growth forecast figure – which Vissoth affirmed had been personally approved by Prime Minister Hun Sen – is considerably greater than the 2.7-per-cent growth rate estimated for the global economy, he noted.
He argued that the Kingdom’s economic growth is underpinned by the increasing diversity in its export mix, with textile-related items accounting for a considerably smaller share than before.
“To deal with these difficulties, we must minimise the negative impact, and seize opportunities for progress, because every crisis represents an opportunity,” he stressed.
Vissoth remarked that ASEAN as a whole could achieve better economic growth this year than the global average as geopolitical conflicts among major powers shift more attention and investment to the Southeast Asian bloc’s member states.
According to the finance ministry’s “Cambodia’s Macroeconomic Situation at a Glance 2022-2023” report, growth in export sectors, especially the garment sector, is tipped to decelerate to 5.5 per cent this year, due to weaker external demand, particularly from the EU market.
It predicted 11.7 per cent growth in the non-garment manufacturing sector, driven by food and beverages for the domestic market as well as furniture, solar items and electronic components for export.
Wholesale-and-retail trade, construction, real estate, and agriculture are expected to grow by 6.5 per cent, 1.1 per cent, 1.2 per cent, 1.1 per cent, respectively, it said, adding that the “tourism sector – hotel and restaurants – is expected to continue rising with the growth of 32.7 per cent” as regional and international travel picks up.
Year-on-year consumer price inflation is anticipated to slow down to around 3.2 per cent in 2023, as oil and other commodity prices gradually return to normal levels, it added.
Still, the March 30 World Bank statement warned that regional economies “must also cope with three important challenges as policymakers act to sustain and accelerate economic growth in the aftermath of Covid-19 – rising tensions between major trading partners will affect trade, investment and technology flows across the region”.