An aerial view of central Phnom Penh showing numerous high-rise buildings. Heng Chivoan
Singapore-based ASEAN+3 Macroeconomic Research Office (Amro) on May 6 projected the Cambodian economy to grow by 4.0 per cent in 2021, led by a robust recovery in manufacturing and supported by continued fiscal stimulus by the government.
“The Cambodian economy is expected to return to positive growth in 2021 after a contraction last year. The recent surge in community cases and lockdown highlight the continuing challenges from the pandemic, as well as the need for faster vaccination and more targeted and flexible policy measures to support recovery,” it said.
The regional economic surveillance unit made its preliminary assessment after its virtual Annual Consultation with Cambodian authorities from April 19 to May 4.
Amro lead specialist Dr Seung Hyun “Luke” Hong noted that the forecast was despite disruptions in domestic activity due to the recent lockdown, stressing that “the recent spike in community cases underscores the need for the government's strong response to contain the pandemic and speed up the vaccination rollout to achieve herd immunity”.
The economic watchdog's growth projection matches up to that made by the Asian Development Bank (ADB) on April 28, which also predicted a 5.5 per cent growth in gross domestic product (GDP) for 2022, as economic recoveries in major trading partners boosts demand for the Kingdom's exports.
ADB country director for Cambodia Sunniya Durrani-Jamal said: “The economy contracted by 3.1 per cent in 2020 because of the global coronavirus disease – Covid-19 – pandemic. The government has responded quickly to the recent spike in cases, and we expect the economy to return to growth in 2021.
“This will help increase household incomes, but not all sectors and regions will benefit equally, so it will be essential to closely monitor household welfare and the need for additional support,” she said.
According to ADB, industrial production is expected to rise 7.1 per cent in 2021 and 7.0 per cent in 2022 on the back of a rebound in the garments, footwear and travel goods sector, as well as growth in other light manufacturing such as electronics and bicycles.
Agriculture is expected to grow by 1.3 per cent in 2021 and 1.2 per cent in 2022, while services may recover more slowly, expanding by 3.3 per cent in 2021 and 6.2 per cent in 2022. Efforts to contain a local outbreak of Covid-19 that began in February are dampening service sector activities, ADB noted.
Travel restrictions are expected to remain in place for most of 2021, which means tourism is not expected to boost services this year, it said. Real estate is expected to recover from last year's contraction, in line with a similar trend for the construction industry.
And Amro stressed that amid this challenging environment, fiscal policy remains crucial, as the rollout of a broad fiscal stimulus package has played a vital role in supporting the economy.
“Going forward, fiscal support measures should become more flexible and targeted given the uneven recovery across sectors. Short-term crisis support should be more targeted and gradually shift toward supporting affected businesses and facilitating the swift reallocation of labour and productive resources to sectors with strong growth potential,” it said.
