Cambodia’s growth in exports and tourism slowed down in the first half of 2015, though domestic demand is holding up supported by an expansion of credit to the private sector.
|Selected economic indicators (%)||2015||2016|
|ADO 2015||Update||ADO 2015||Update|
|Current Account Balance (share of GDP)||-12.9||-12.3||-12.7||-12.2|
Source: ADB estimates.
Shipments of garments and footwear produced in Cambodia rose by 11.0% year on year, decelerating from 14.5% in the first half of 2014. Growth in total merchandise exports moderated to 14.0% from 18.3%. As for tourist arrivals, the rate of increase slowed to 4.6% in the first half from 5.2% a year earlier. Agriculture is suffering from an extended period of low rainfall.
However, data indicate that domestic demand is holding up, based on 33.3% year on year expansion of credit to the private sector in May and indications of high growth in imports. While the expansion of garment manufacturing, construction, and services—in particular tourism, finance, and real estate services— continues to drive growth in Gross Domestic Product (GDP), the pace in the garment and tourism industries seems to have moderated.
The garment industry faces increased competition arising from the appreciation of the US dollar, in that the Cambodian economy is heavily dollarized, and from other low-wage competitors including Myanmar.
The Asian Development Outlook 2015 Update lowers forecasts for GDP growth in 2015 and 2016. Inflation was a mild 1.0% year on year in May 2015 and averaged just 1.1% in the first 5 months as prices declined for transportation and fuel.
The inflation forecast for 2015 is trimmed, but the higher forecast for 2016 is maintained. Current account forecasts are adjusted in line with a revised narrower deficit for 2014. Gross official reserves of $4.4 billion at the end of 2014 provided cover for about 4 months of imports of goods and services.
Excerpted from the Asian Development Outlook 2015 Update.