Cambodia posted a trade deficit of $6.506 billion for the January-September period, amounting to 15.86 per cent of total trade, according to Customs. Although a staggering sum, economists have reassured that the negative trade deficit has not significantly exacerbated domestic inflation risks, nor is it an explicit indicator of deteriorating macroeconomic conditions.

On the contrary, the nine-month trade deficit – the amount by which a country’s imports exceed its exports – reflects optimal economic activity accompanying the easing of a major pandemic, which pushes up domestic demand, they say.

In fact, General Department of Customs and Excise (GDCE) figures show that the trade deficit inched up just 0.36 per cent year-on-year, whereas its ratio to total trade fell by 2.79 percentage points.

In the first nine months of 2022, Cambodia’s international trade totalled $41.023 billion, which was up by 18.01 per cent year-on-year. Exports totalled $17.258 billion, up 22.06 per cent, and imports were $23.764 billion, up 15.24 per cent.

Royal Academy of Cambodia economics researcher Ky Sereyvath told The Post on October 17 that the increase in imports, perhaps paradoxically, reflects the momentum in Cambodia’s post-Covid economy.

“With the health crisis easing, it requires us to import a lot since we cannot immediately produce enough to meet all of the demand, which also includes raw materials for the manufacturing sector.

“Given the current pace of export growth, an increase in imports poses no major threat to our economy,” he maintained.

GDCE statistics show that export growth outpaced import growth by 6.82 percentage points over the period, which Sereyvath stressed represents purchases of necessary international raw materials for manufacturing processes.

“If annual export growth holds steady at around 20 per cent while imports rise in the teens, that will signal that the economy is doing well, and maybe 10 years from now, the trade balance will be positive.

“In this scenario, the government needs to focus on encouraging small- and medium-sized enterprises [SME] to keep pace with imports, to step up domestic production,” he said, suggesting that Cambodia work to achieve greater self-sufficiency and curb its reliance on imports.

Chan Sophal, director of the Center for Policy Studies, recently noted on social media that central banks around the world are raising interest rates to reduce or prevent inflation, which generally makes borrowing money more expensive, tamping down consumer demand and bringing commodity prices under control.

He asked if Cambodia should follow in the footsteps of “rich countries”, by implementing measures to trim demand and reduce cash flows.

“I don’t think we should do the same. We should look at reducing demand for unnecessary imported goods. However, this reduction would by and large undermine access to basic necessities for the needy.

“There should be policies in place that support an increase in, or at least safeguard, the incomes of those who are still in need, as well as boost production of in-demand goods, especially food, which is essential for life,” he said.

Late last month, the World Bank raised its 2022 growth forecast for Cambodia’s real gross domestic product (GDP) to 4.8 per cent, from 4.5 per cent in April, as a rise in the export of garments, footwear and travel goods (GTF), bicycles and agricultural items continue to underpin post-Covid-19 economic recovery.