By Sok Lak
While the Cambodian economy in good shape in this half year, Asian Development Bank (ADB) has revised Cambodia’s economic growth in 2011 to be 6.8 percent while the previous estimate, 6.5 percent, was made in April.
According to the Asian Development Outlook 2011, in an updated release on September 2011, the revision is mainly driven by a surge in garment exports in the first half of 2011.
“Cambodia will maintain solid economic growth for 2011 given the faster than expected recovery of garment exports and tourism as well as the positive outlook for the expansion of agricultural products. However, the current slowdown in global trade is likely to temper growth momentum in 2012,” Peter Brimble, a Senior Economist of ADB to Cambodia, said.
The value of Cambodia’s garment exports to the United States in the first six months of this year compared to the same period last year increased by over 23 percent. Meanwhile, tourism arrivals increased by more than 13 percent and rice exports are on an upward trend.
“Garment exports and tourism industry growth went over the expectation, and Cambodia’s expected economic growth rate reached 8.7 percent this year,” Prime Minister Hun Sen said recently. As the U.S. and EU economic situation is not clear and Cambodia is still dependent on the U.S. and EU markets, so Cambodia needs to expand its share of the market in Asia in order to avoid the risk,” Samdech added.
The Asian Development Outlook Update forecasts growth of 6.5 percent in 2012, down from a 6.8 percent projection made when ADB launched the annual economic flagship Asian Development Outlook 2011, reflecting the current frailty in global markets which could depress demand for Cambodian products in the second half of 2011 and into 2012.
Nevertheless, the report says, the declining trend in global markets is not expected to outweigh the positive growth already perceived. However, long standing challenges remain for Cambodia’s narrowly based economy – accelerating economic diversification, expanding the fiscal space, addressing governance issues, and strengthening the investment climate.
“Cambodia needs to address the long standing challenges to achieve sustainable growth,” stressed Mr. Brimble. “Reducing the high cost of transport, energy and diversifying agricultural products and the tourism sector are critical and will be addressed under ADB’s Country Partnership Strategy 2011-2013,” he added.
Inflation is expected to average 5.5 percent in 2011 and 2012, unchanged from the ADO 2011 projection, thanks to the drop in global oil prices while assuming that they remain relatively constant for the rest of the year,” the report said.
It estimates the current account deficit at 11.6 percent and 11.0 percent of GDP, respectively in 2011 and 2012 due to the declining trade deficit.
“Cambodia’s trade volume in total will increase to over US$ 13.6 billion for 2011 as the economic growth of the country is projected to reach 6.8 percent,” the Asia Development Bank said in its statement on Tuesday. “The total exporting of Cambodia will be worth nearly US$ 6 billion while the total importing will account for over US$ 7.7 billion for 2011,” ADB said in its Asian Economic outlook for 2011. ADB said that in 2010, total trade volume of the country in total was worth over US$ 11.7 billion. ADB predicted that in 2012, Cambodia’s trade volume will be worth US$ 15.6 billion.
At the same time, the tourism industry will be expected to gain 2.8 million tourist arrivals at the end of 2011, and in 2010, Cambodia received 2.5 million tourists with a total revenue of US$ 1.75 billion, a report from the Tourism Ministry indicated.
The garment industry earns over US $1.9 billion for the first half of 2011 with an increase of 45 percent if comparing to the same period last year. Mostly, Cambodia imported garments to the US and EU markets, the report from the Commerce Ministry stated.
A report from the Land Management Ministry also said that for the first semester of 2011, the investment for construction projects was worth about US$ 677 million with 1,079 development projects across the country while the country spent US$ 351 million for construction materials’ importation. Agriculture absorbed over 70 percent of the available labor force, and is still considered firm for economic growth as government policy tries to boost investment and exports on milled rice products even as it plans to export one million tons of milled rice products by 2015.
Mr. Brimble said that developing Asia will continue its steady growth of 7.5 percent in 2011 and 2012 despite industrial economies ‘slowdown while inflation in 2011 will be higher than expected at 5.8 percent, but it will decelerate to 4.6 percent in 2012.
Source: The Southeast Asia Weekly, September 18-24, 2011, Vol. 5, Issue 38, Page 1&3