Agriculture slowed but industry and services expanded in 2013, maintaining economic growth at just above 7% for the third consecutive year. Political tensions and labor unrest suggest growth will ease in 2014 before picking up next year. Inflation, at modest rates last year, is seen edging higher in 2014. Spurring the development of small and medium-sized firms would help to sustain and diversify economic growth.
Robust growth in services and expanding export industries drove economic growth of 7.2% in 2013.
Services remained the largest source of growth from the supply side, expanding by an estimated 8.4% in 2013. This stemmed largely from growth in wholesale and retail trading, real estate services, and tourism-related services. Bank credit to wholesale and retail trading increased by 24.5% to $2.5 billion and to real estate by 36.5% to $250.5 million. Tourist arrivals rose by 17.5% to 4.2 million.
Industry grew by an estimated 10.5% on strong demand for Cambodian garments and footwear in the European Union. Exports of garments and footwear to that market surged by 26% to $2.0 billion in 2013 and those to the United States rose by 6.0% to $2.1 billion, according to customs data.
Construction and rice milling also contributed to industry growth. Bank credit to construction rose by 29% to $577 million, and exports of milled rice almost doubled to 366,000 tons, valued at $262 million.
Floods in September and October 2013 damaged crops and reduced growth in agriculture to 1.8% last year.
|Selected Economic Indicators (%) - Cambodia||2014||2015|
|Current Account Balance (share of GDP)||-11.3||-10.9|
Source: Asian Development Outlook (ADO) 2014; ADB estimates.
Political tensions since national elections last July, together with strikes for higher wages by garment workers, dented investor confidence and disrupted some production of garments and footwear in late 2013 and early 2014. Political uncertainty and the risk of further labor unrest suggest some dampening of investment this year. The uncertainties could weigh as well on tourism and real estate activity. Consequently, economic growth is forecast to ease to 7.0% this year before picking up to 7.3% in 2015.
Source: ADB. 2014. Asian Development Outlook 2014. Manila.