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ADB Forecasts Robust Growth for Cambodia, Warns of Child Malnutrition

News from Country Offices | 9 April 2013

PHNOM PEHN, CAMBODIA – Cambodia’s economy is expected to remain vigorous over the next two years as Cambodia’s main markets in Europe and United States recover, but stagnating child malnutrition rates pose a significant long-term threat to the country’s development, the Asian Development Bank (ADB) says in a new report.

“Private consumption, exports and investment, including strong and diversified foreign direct investment, will all drive economic development in 2013 and 2014” said Eric Sidgwick, ADB Country Director for Cambodia. “Economic growth is projected at 7.2% in 2013, picking up to 7.5% next year as recovery in Europe and the US takes hold.”

The Asian Development Outlook 2013 (ADO 2013), ADB’s flagship annual economic forecast, shows industry is expected to expand by 10.5% in 2013, as European demand for Cambodian products is expected to grow steadily, supported by duty-free access to the European market. Shipments of garments and footwear to the US will likely be subdued this year but should pick up after that.

The report notes that net foreign direct investment inflows surged by an estimated 75% in 2012, to $1.5 billion, funding new industries including automotive parts, electronics, and processing of agricultural products, as well as diversifying garment production into higher-value products and tourism into new areas. A surge in building approvals in 2012 will accelerate construction activity this year. The services sector is expected to grow by about 7%, with strong growth in tourism and real estate activity. Agriculture will likely grow by 4%, assuming favorable weather.

Moderate global food price increases and domestic harvests lead to expectations that inflation will average about 3.0% in 2013. In 2014, robust domestic demand is expected to result in higher inflation of 3.5%. These inflation forecasts will be at risk if bad weather pushes up food prices.

While Cambodia’s growth prospects remain positive, chronic poor health and malnutrition is stunting the growth of 40% of Cambodian children. Left unaddressed, Cambodia’s continuing high incidence of child malnutrition will negatively affect future productivity and economic growth due to the associated irreversible long-term damage to physical and cognitive development.

The report explains that functional losses experienced by children in the first 1,000 days of life, from conception to the second birthday, can never be fully recovered. ADO 2013 offers policy recommendations such as: conditional cash transfers to help change parental behavior that compromises child nutrition, improving local food production to ensure sufficient quantity, quality, and variety; promoting breastfeeding; increasing nutrition education among pregnant women; providing women and children with improved basic health services; and reducing nutrient loss through improved hygiene, sanitation, parasite control, and food processing and storage.