Cambodia Economy Bucks Regional Trend

Driven by garment and improved agricultural export markets, Cambodia has bucked the wider trend of slowing Southeast Asian economies, according to the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).

ESCAP’s semi-annual Economic and Social Survey of Asia and the Pacific, published Wednesday, puts Southeast Asia’s annual growth at 4.6 per cent, continuing a three-year consecutvive, below 6 per cent trend for the region.

But despite significant infrastructure and human capital difficulties, Cambodia’s economy continues to show year-on-year above average growth and is on track to record 7.2 per cent growth in 2014, slightly down from 7.6 in 2013, the UN organization’s study says. The Kingdom’s inflation rate remained stable at 2.9 per cent in 2013.

“The least developed countries in the subregion, namely Cambodia, the Lao People’s Democratic Republic, Myanmar and Timor-Leste, maintained high growth rates, underpinned in part by steady inflows of foreign investment, especially in the resource sector,” the study reads.

The study adds that while China, India, Indonesia and Malaysia sustained or even increased the income gap between the richest 20 per cent and the poorest 20 per cent of their countries, Cambodia, fuelled by an increasing labour force, was one of the few that saw a decrease in income inequality.

But the UN-backed study also pointed out that Cambodia, along with its fellow least developed neighbouring countries, continues to lag behind the rest of the world with regards to integrating into global supply chains.

This in turn, “limits their ability to diversify their economies and engage in higher value-added activities,” the study says.

And in the garment sector, which accounts for 80 per cent of the Kingdom’s total export market, there is still room for improvement.

“The minimum wage in the (Cambodia’s) garment industry, which employs about 600,000 workers, was raised; yet, working conditions still need to be improved,” the report says.

Source: Phnom Penh Post | August 8, 2014 | By: Eddie Morton

Cambodia’s Economy to Grow by 7% in 2013

Cambodia’s economy is projected to grow by 7 percent this year, Deputy Prime Minister and Finance Minister Keat Chhon said Friday.

He said the growth still is contributed by garment exports, tourism, agriculture, real estate and construction.

The minister added that the country’s political stability, macroeconomic and financial stability and transparent legal framework will encourage more foreign investors to come to Cambodia in years to come.

“With this expected growth, Cambodia will get out of the classification of a low-income to a lower-middle-income country at the end of this year,” he said at the opening of the 3rd Cambodia Industry-Handicraft Fair at the Diamond Island Exhibition Center.

Lower-middle-income countries are those with GDP per capita between 1,006 US dollars and 3,975 US dollars, as defined by the World Bank.

Last year, Cambodia’s GDP per capita was nearly 1,000 US dollars, and it was expected to rise to 1,080 US dollars this year, Keat Chhon said.

Source: Global Times (March 30, 2013)

IMF Warns Cambodia For Risk From A Credit Boom

Last week, the International Monetary Fund (IMF) released a warning to Cambodia regarding a credit boom which poses a treat to economic growth. The followings are extracted from British Broadcasting Corporation (BBC) News:

Banks have been cutting interest rates to win customers and private sector credit has increased by almost a third in the past 12 months, the fund said.

This means that borrowing levels are now equal to 37% of the country’s total economic output, well above the median for most other low-income nations.

A similar surge in 2008 saw a real-estate boom and bust, the fund warned.

If the current rate of growth in the private credit market continues then it may signal overheating, according to the International Monetary Fund (IMF).

Tighter conditions

The National Bank of Cambodia (NBC), the country’s central bank, has taken some steps to tighten and slow lending.

It most recently raised the amount of money that banks need to hold in reserve, making it harder for them to access the cash needed to lend.

However, the IMF said that raising the reserve requirement “does not automatically mean tighter credit conditions” and further steps were needed.

“Cambodian banks still have excess liquidity, a number of them are lowering interest rate spreads to compete for market share, and some increasingly rely on cheaper external funding from foreign banks,” it explained.

The IMF advised the central bank to implement measures which are not just effective in reducing credit growth, but also cause the least amount of distortion in the market.

Source: British Broadcasting Corporation (January 9, 2013)