Phnom Penh: The International Monetary Fund (IMF) has projected that Cambodia can achieve an annual growth rate of approximately 6 percent by 2030, with a possibility of reaching nearly 8 percent if it follows the historical growth trajectories of countries such as China, Japan, and South Korea.

According to Agence Kampuchea Presse, the IMF’s annual staff report on Cambodia, released in Washington, highlights that while Cambodia’s economic recovery is underway, its pace remains uneven. The report emphasizes that a significant slowdown in credit growth has exposed the Cambodian economy to increased financial sector vulnerabilities. The IMF suggests that policy formulation should focus on ensuring a durable and inclusive recovery in the short term and achieving development goals in the medium term.

With Cambodia on track to graduate from the Least Developed Country (LDC) status by 2030, the report underscores the need to refocus on more resilient and diversified growth drivers. The IMF has utilized a novel machine-learning technique, dynamic time warping, to forecast Cambodia’s medium-term growth potential. This method leverages historical growth patterns of countries with similar economic conditions, including India, Indonesia, Laos, Sri Lanka, Japan, Bangladesh, South Korea, and others.

The dynamic time warping technique identifies economic episodes in other countries that closely mirror Cambodia’s current indicators. These episodes, spanning from the late 20th century to the early 21st century, are used to project Cambodia’s potential growth path. The aggregated episodes for Cambodia in 2030 suggest an average forecast of 5.8 percent growth, with a median forecast of 6.3 percent. If Cambodia’s economy exceeds expectations, growth could range from 7.5 percent to 7.9 percent by 2030. However, the IMF cautions that such outperformances often face slower growth in subsequent periods and are statistically unlikely to maintain the same performance ranking over extended durations.

The report highlights the exceptional economic growth achieved by Japan, South Korea, and China during specific periods due to export-oriented industrialization policies and strategic integration into global value chains. High investments in human capital through education and health infrastructure, along with institutional reforms that improved governance, were critical factors enabling these countries to achieve sustained growth.

Despite lagging in human capital accumulation and labor productivity, the IMF sees potential for Cambodia to emulate the success of China, Japan, and South Korea. The IMF suggests implementing reforms to diversify growth and improve productivity, such as upgrading Cambodia’s export base, enhancing its global positioning in supply chains, and increasing its capacity to produce more complex items and services. Promoting investment in higher-value-added industries, production networks, logistics, and low-cost renewable energy infrastructure is crucial for improving competitiveness.

The report also identifies the high cost of electricity as a significant obstacle for foreign investors in Cambodia, with rates nearly double those of neighboring Vietnam. Developing a comprehensive energy strategy to reduce costs and improve reliability is essential for boosting competitiveness. Additionally, concerns regarding the enforcement and interpretation of laws and governance-related issues are frequently reported by foreign businesses. Targeted reforms to enhance governance frameworks, improve transparency, and bolster investor confidence are recommended.