PHNOM PENH, CAMBODIA (25 September 2019) — The Cambodian economy remains on track to grow strongly this year despite a slower-than-anticipated rise in agricultural production, says a new report by the Asian Development Bank (ADB) released today. In an update of its flagship annual economic publication, Asian Development Outlook (ADO) 2019, ADB retained its forecast of real gross domestic product (GDP) growth for Cambodia of 7.0% this year and 6.8% in 2020.
“Cambodia’s economy continues to expand at a robust pace due to continued strength in traditional sectors such as garments, tourism, trade, and construction,” said ADB Country Director for Cambodia Ms. Sunniya Durrani-Jamal. “With increased uncertainty in the global trading environment and its impact on services such as tourism, Cambodia urgently needs a focused diversification strategy into niche and higher value products and services. This will require reducing risks emanating from lending to an overheated real estate sector, development of more skilled and productive workforce to justify rising wages, and attracting high-quality capital investment—all of which, in turn, need strong governance and institutions.”
The report notes risks to production from climate change. Drought in the first half of the year lowered crops and fishery production, reducing agricultural growth to around 1.1% this year. Growth for industry was robust due to a surge in the production of garment, footwear, and travel goods, which led to an upward revision from 10.1% in ADB’s April forecast to 10.6%.
Faster-than-anticipated growth in imports despite the strong increases in merchandise exports and tourist arrivals is expected to widen the current account deficit, excluding official transfers, over the forecast horizon. The deficit is financed by buoyant foreign direct investment inflows, which are expected to build up the gross international reserves to around $12.3 billion by year-end, providing 6 months of import cover.
With lower fuel prices and a small increase in food prices, inflation was subdued at 1.4% year on year at the end of June and is expected to average 2.2% for 2019.
ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. In 2018, it made commitments of new loans and grants amounting to $21.6 billion. Established in 1966, it is owned by 68 members—49 from the region.