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Economy
Higher inflows of foreign direct investment contributed to Cambodia's strong economic growth in 2012. Outcomes exceeded expectations in agriculture, construction, and tourism. The forecast is for further robust growth, with the trajectory expected to steepen slightly in 2014 with recovery in major export markets. Inflation subsided in 2012 and is projected to remain modest through the forecast period. Although poverty has declined, persistently high child malnutrition remains a critical development challenge.
Economic performance
Cambodia's gross domestic product (GDP) grew by 7.2% in 2012, driven by robust consumption and investment. Consumption expanded by an estimated 9.5% and made the biggest contribution to GDP growth from the demand side. Gross fixed investment increased by 30%, spurred by a surge in foreign direct investment (FDI) and higher bank lending. However, net exports dragged on GDP growth as they fell, partly reflecting elevated imports needed for power-generation projects.
| Selected Economic Indicators (%) - Cambodia | 2013 | 2014 |
|---|---|---|
| GDP growth | 7.2 | 7.5 |
| Inflation | 3.0 | 3.5 |
|
Current account balance (share of GDP) |
-11.1 | -10.1 |
Source: ADB estimates.
Economic prospects
Economic growth is forecast at 7.2% in 2013, picking up to 7.5% next year as recovery in Europe and the United States takes hold.
European demand for Cambodian garments and footwear is expected to maintain good growth, supported by duty-free access to the European Union. Shipments to the US will likely be subdued this year but should pick up after that. Increased foreign investment is funding new industries, including the manufacture of automotive parts and processing of agricultural products, as well as diversifying garment production into higher-value products. Last year’s surge in building approvals bodes well for construction. The timing of offshore oil exploitation is unclear. Industry as a whole is expected to expand by 10.5% in 2013.
The service sector is seen growing by 7%. Growth in tourism is benefiting the hotel, restaurant, retailing, and transport and communications subsectors. Buoyant property development stimulates growth in finance and real estate services. Agriculture will likely grow by about 4%, assuming favorable weather. The Government of Cambodia is supporting paddy production and exports of milled rice.
Source: ADB. 2013. Asian Development Outlook 2013. Manila.