An Asian Development Bank (ADB) report released on Wednesday said the Cambodian economy remains on track for strong growth of seven per cent this year, with 6.8 per cent forecast for next year.

“Cambodia’s economy continues to expand at a robust pace due to continued strength in traditional sectors such as garments, tourism, trade and construction,” ADB country director for Cambodia Sunniya Durrani-Jamal said.

However, the Asian Development Outlook (ADO) report noted risks to production from climate change, with drought in the first half of this year scaling down growth forecasts in the agricultural sector to around 1.1 per cent.

A rise in the production of garment, footwear and travel goods drove the bank to revise upwards its April forecast of 10.1 per cent growth for industry this year to 10.6 per cent, it said.

The ADB predicts that a faster than expected growth in imports – amid a strong surge in merchandise exports and tourist arrivals – will widen the current account deficit, excluding official transfers, beyond previous estimates.

The deficit is buoyed by foreign direct investment inflows, which are anticipated to increase gross international reserves to around $12.3 billion by the end of this year – providing six-months of import cover.

“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,” Durrani-Jamal said.

Inflation was muted at 1.4 per cent year-on-year at the end of June and is anticipated to average 2.2 per cent for this year.

The bank made commitments last year to the tune of $21.6 billion in loans and grants, ADB said.

Founded in 1966, ADB is owned by 68 members – 49 from the region.