The forecast is for higher growth in Cambodia based on a better outlook for exports and tourism, an easing of domestic political and labor tensions, and lower fuel costs. Prospects are brighter as well for agriculture, which lagged in 2014. Inflation has ebbed and is projected to remain low. A major development challenge is to diversify sources of growth.
|Selected Economic Indicators (%) - Cambodia||2015||2016|
|Current Account Balance (share of GDP)||-12.9||-12.7|
Source: ADB estimates.
Solid growth in 2014 estimated at 7.0% slightly underperformed the 7.3% average of the previous 3 years. Industry and services were the drivers as agriculture lagged. Prolonged expansion has lifted Cambodia’s gross national income per capita toward the $1,045 threshold for entry into lower-middle income status.
Political tensions and, in the garment industry, labor unrest spilled from 2013 into 2014 to temporarily dampen investment and disrupt garment manufacturing and tourism. These headwinds eased as the year progressed. Exports of garments and footwear, based on customs data, reached $6.0 billion in 2014, rising by 10.7% but decelerating from the previous year. Shipments to the European Union increased by 22% to $2.4 billion, but those to the US fell by 5.4% to $2.0 billion. Construction continued to expand, funded by inflows of foreign direct investment (FDI) and a 34.3% rise in bank credit for the segment. Industry as a whole grew by an estimated 9.8%.
The outlook is for economic growth to pick up in light of anticipated stronger performance in trade partners - the United States and Thailand and, to a lesser extent, the European Union - coupled with a calmer domestic political environment and lower fuel costs. The gross domestic product is projected to increase by 7.3% in 2015 and 7.5% in 2016.
Over the medium term, growth will be stimulated by gradual diversification into light manufacturing and further integration into regional and global supply chains.
Excerpted from the Asian Development Outlook 2015.