Cambodia's economy grew by 5.1 per cent last year, propelled by effective Covid-19 health policy and management, resumption of domestic economic activity and increasing external demand, despite geopolitical competition tied to the Ukraine conflict.

This is according to the National Bank of Cambodia’s (NBC) “Macroeconomic and Banking Sector Development in 2022 and Outlook for 2023” report published on January 11.

“In 2022, the global economy rebounded due to [post-Covid-19] recovery … but several challenges remain, such as supply chain disruptions due to lockdown measures in China and the ongoing Russia-Ukraine war, causing a hike in prices of goods, especially in fuel and raw materials,” the report said.

“These factors pushed global inflation to 8.8 per cent in 2022 – compared to 3.4 per cent in 2021 – in both advanced and emerging economies – 7.2 per cent and 9.9 per cent respectively.

“In response, most central banks have attempted to curb the increase in inflation by raising policy rates aimed at reducing the overall level of demand for investment and consumption,” it added.

In Cambodia, economic recovery has been “supported and accelerated” by “the relaxation of regulatory forbearance in the banking sector” and a comprehensive roadmap designed to safely guide the economy as Covid-19 becomes endemic, the NBC suggested.

This roadmap is formally known as the “Strategic Framework and Programmes for Economic Recovery in the Context of Living with Covid-19 in a New Normal 2021-2023”.

The central bank said that last year’s 5.1 per cent economic growth rate “was driven by a 9.4 per cent increase in the manufacturing sector, 15.2 per cent in hotels and restaurants, 6.1 per cent in transportation and 4.5 per cent in wholesale and retail trades.

“Meanwhile, exports grew by 19.8 per cent, much faster than that of imports, eight per cent; and tourism revenues noticeably grew at a 6.6 per cent rate, while remittances from Cambodian workers working overseas increased by four per cent,” it said.

For reference, the respective websites of the International Monetary Fund (IMF) and World Bank (WB) on January 12 showed the 2021 nominal gross domestic product (GDP) for Cambodia at $26.313 billion and $26.961 billion.

These numbers together with the economic growth rate figure provided by the NBC offers a rough estimated range of $27.641-28.350 billion for the 2022 GDP.

The NBC added that foreign direct investment (FDI) inflows increased by four per cent, “mainly due to the garment and food processing sectors, although the inflows to some other sectors remained subdued”.

An earlier report jointly published by the NBC and Council for the Development of Cambodia (CDC) – the government’s highest decision-making body for large-scale investments – had said cumulative FDI inflows into the Kingdom between August 5, 1994 and end-2021 totalled 168.8 trillion riel ($41.0 billion), which it said marked an 11.2 per cent increase from the end of 2020.

Similarly, the CDC on January 6 reported that major investment projects – both FDI and non-FDI – cumulatively valued at $4.68 billion were approved in 2022, up 7.5 per cent over $4.355 billion in 2021.

The January 11 NBC report added that the average year-on-year inflation rate in 2022 stood at 5.3 per cent, compared to 2.9 per cent a year earlier, citing elevated fuel and food prices.

“The inflation rate peaked at 7.8 per cent at the end of the first half … [and] gradually declined in the second half as fuel and food prices [moderated],” it said.

On December 7, the WB noted in a statement that it had maintained its 2022 economic growth forecast for Cambodia, issued in September, at 4.8 per cent, explaining that the Kingdom’s “garment industry, travel goods and footwear exports have been resilient.

“The services sector, especially travel and tourism, has done well since the introduction of the ‘Living with Covid-19’ strategy in late 2021, and total international visitor arrivals have steadily increased, reaching 1.2 million in the first nine months of 2022. Business and consumer confidence have risen and both domestic and foreign investment have increased,” it said.

Speaking in the statement, Mariam Sherman, WB country director for Cambodia, Laos and Myanmar, recommended the Kingdom take action to bolster its tourism industry and broader economy, as well as consolidate its fiscal position, to brace for potential external demand shocks.

“Revenues are up, thanks to the economic recovery and administration improvements,” Sherman said. “Broadening the tax base will help ensure the resources needed to promote Cambodia’s economy and weather slowing growth among major trading partners. Tourism and hospitality are particularly promising areas for growth.”

The NBC forecast that further economic reopening this year “will support the recovery of key economic sectors including trade, tourism and investment although the global economy still faces numerous challenges and an increasing uncertain outlook”.

Despite external challenges, the central bank pegged economic growth at “around six per cent” this year, “supported by an expected 6.9 per cent increase in the garment sector and 14.3 per cent rise in non-garment manufacturing products”.

The report said that the tourism sector “is estimated to grow by 18.5 per cent; the agricultural sector is forecasted to further pick up by 1.1 per cent, on the back of” bilateral and multilateral free trade agreements (FTA) as well as preferential access to the EU market for Indica rice – following three years of safeguard measures.

“But, the construction and real estate sectors are expected to continue experiencing slower growth, at 1.7 per cent and 1.2 per cent, respectively.

“Inflation in 2023 remains highly uncertain due to the prolongation of the Russia-Ukraine war and the uncertainty of global economy. In the scenario of slowdown in the global economy and declining food prices, inflation in Cambodia is projected to decelerate to 2.5 per cent,” it added.