Singapore-based ASEAN Plus Three Macroeconomic Research Office (Amro) has forecast Cambodia’s economic growth at a moderate 2.8 per cent in 2021, tempered by uneven growth across sectors.
This projection is more upbeat than than the International Monetary Fund’s (IMF) 2.2 per cent and Asian Development Bank’s 1.9 per cent.
In its 2021 Annual Consultation Report on Cambodia released on November 22, Amro said: “Strengthening pandemic management and implementing flexible policies to support vulnerable sectors and put the economy on a firmer recovery path remain vital, while the ongoing fast rollout of vaccines will ensure a steady economic reopening.
“The recovery momentum is dampened by the slow return of international tourists, despite easing containment measures,” it said.
It noted that amid improvements in the public health system, “Cambodia’s high reliance on close contact services sector and a labour-intensive manufacturing sector renders its recovery more vulnerable to Covid-19 outbreaks”.
Early last month, the IMF presaged that Cambodia economic growth would rise “gradually to pre-crisis rates of 6.5 per cent after a few years”.
The Washington-based development lender underlined that the Covid-19 crisis triggered a sharp fall in external demand last year that dragged down the economy, and that the Kingdom’s third coronavirus outbreak in 2021 – dubbed the “February 20 community event” marking the date it was first detected – further added to the woes.
The IMF noted that the Kingdom’s economy has sustained devastating Covid blows despite sweeping government safeguards, contracting by an estimated 3.1 per cent last year, following a decade of growth averaging around seven per cent each year.
“Although activity showed signs of picking up toward the end of 2020, the rapid spread of the virus from February this year has set the economy back again. As in many other countries, the crisis has strained the ability of households and firms to service loans.
Meanwhile, Amro argued that risks in the financial sector could derive from a deterioration in credit quality and possible asset price inflation, and that Covid could leave long-term scars on the Kingdom’s growth potential, impeding a rapid return to sustainable high growth.
“Given the slow and uneven recovery in an environment of high uncertainty, more targeted and flexible fiscal policy support is required,” it said. “As demand for liquidity remains high, accommodative policy measures should continue while enhancing the monitoring and supervision of the financial system.”
Amro recommended that the National Bank of Cambodia ensure that the unwinding of extraordinary measures is well-communicated to reduce policy uncertainties.
Coordinated efforts to address structural constraints should be accelerated to boost competitiveness and resilience of the economy, it advised.