The Asian Development Bank (ADB) said Tuesday that Cambodia’s economy was expected to grow 5.5 percent this year and 6.0 percent next year as a more robust tourism recovery offsets slower exports of garments, footwear and travel goods.
“Industry continues to benefit from new trade agreements and policy reform that includes a new investment law to create a one-stop service organisation for investors,” the bank said in its annual development outlook for Asia.
The outlook forecast industrial output to expand 5.8 percent this year and 7.8 percent next year, with “slow” growth in construction activity. Agriculture is projected to grow 1.1 percent this year and 1.2 percent in 2024, boosted by crop exports.
Growth in services is forecast to accelerate to 7.3 percent this year before easing to 6.8 percent next year, led by stronger tourism growth following the loosening of COVID-19 restrictions in China.
The service sector is also expected to be boosted by the hosting of the SEA Games in May, the ASEAN Para Games in June and national elections in July.
Inflation is projected to moderate to an average of 3.0 percent this year, rising to 4.0 percent next year.
The ADB expects the government to sustain COVID-19 programmes as well as skills training, cash for work and cash transfers. The two sporting events and the national elections over the next few months are “important spending priorities,” it added.
‘LOW RISK OF DEBT DISTRESS’
The bank reiterated that Cambodia was at a “low risk of debt distress” with public external debt projected to rise to a “manageable” level of around 35 percent of GDP.
Sovereign bond issues – expected to raise US$ 200 million this year – “will provide the government with an alternative financing source and more instruments for managing monetary policy, while offering more investment options to institutional investors.”
With the recovery in tourism and growth in merchandise exports, the ADB expects Cambodia’s current account deficit to shrink further.
The deficit is expected to be financed by foreign direct investment and aid, boosting international reserves beyond US$ 21.1 billion by the end of next year – equivalent to seven months of imports.
Risks to the outlook include weaker growth in the United States and Europe along with high private debt, disappointing tourist arrivals from China and foreign direct investment, soaring energy prices and extreme weather, the bank said.
Source: Agence Kampuchea Presse