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Cambodia's Economy Continues To Gain Ground

MANILA, PHILIPPINES (9 April 2002) - Cambodia's economy continues to gain ground, with gross domestic product (GDP) growth expected to be 4.5 percent in 2002 and 6.1 percent in 2003, according to the Asian Development Outlook 2002 (ADO) released today by the Asian Development Bank.

Garments and tourism will support the economy in 2002 and 2003. Exports will benefit from increased demand as the world economy bounces back, according to the ADO, an annual publication analyzing and forecasting economic trends.

Inflation will be subdued, given the central bank's recent history of responsible monetary management. Although increased demand is expected to lead to some upward pressure on prices, inflation should hover below 5 percent in 2002-2003.

Continued reforms in the finance sector will help improve the investment climate and lead to a gradual increase in savings and investment rates.

Despite severe flooding that hit the country in late 2000, Cambodia's economy grew by 5.3 percent in 2001, a strong performance given the global slowdown.

In 2001, the ADO notes, the economy was balanced on several fronts. Agriculture, which accounts for 32 percent of the economy, expanded by 5 percent despite flooding and drought.

Industrial growth, dominated by garment production, showed a growth rate of 12 percent. The services sector expanded by 2 percent and tourism by 4 percent.

Still, the ADO says that per capita incomes are rising by only 2 percent a year. The rate of expansion in agriculture is of particular concern, given the fact that over 80 percent of the population live in rural areas and depend on this sector for their livelihood.

The ADO points out that Cambodia is still recovering from more than 20 years of war and isolation and, despite making progress in improving the quality of life of its citizens, the government - together with donors - needs to do more.

Cambodia's poverty is concentrated in rural areas where an estimated 90 percent of the poor live. Economic expansion has centered on growth in textile production and exports, benefiting mainly urban dwellers. For the benefits of this growth to reach the rural poor, investment is necessary to restore the physical infrastructure and improve the quality of life of rural dwellers.

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