The Asian Development Bank (ABD) has slashed Cambodia’s 2020 gross domestic product (GDP) growth to 2.3 per cent from its initial 6.8 per cent forecast due to the slowdown in major economies and China and reduced access to export markets.
However, growth is projected to trend upwards to 5.7 per cent in 2021 if the pandemic ends and economic activities normalise, according to its annual publication Asian Development Outlook 2020 released today.
Inflation would likely remain low at around 2.1 per cent in 2020 and stay subdued next year, on the back of compressed fuel prices.
In a statement, ADB Cambodia country director Sunniya Durrani-Jamal said faced by unprecedented challenges posed by Covid-19, the government has taken the right steps to respond to the crisis.
“[This] includes providing wage support for garment workers, and tax and credit relief for businesses. The government has also created the fiscal space to minimise the economic impact of this crisis, especially on the most vulnerable people,” she added.
The publication highlighted that Cambodia’s services sector is expected to contract by 1.7 per cent in 2020, as tourism drops and growth in real estate slows.
Industry growth would slow to 6.5 per cent because of a deceleration in garment production for exports and slower growth in construction.
“The government [is also] committed to diversifying the non-banking financial sector and developing local capital markets to provide much-needed financing for diversified investment and growth,” the publication stated.
Durrani-Jamal said Cambodia’s focus should be on Covid-19 containment, without which the recovery of the tourism and services sectors will be difficult.
As such, she said the government could draw from a $6.5 billion Covid-19 response package to meet the immediate needs of its developing member countries to stimulate their economies and provide social protection.
In November, ADB, which is Cambodia’s largest multilateral donor, agreed to provide $1.5 billion in loans, grants and technical assistance for agriculture and natural resources management.
The financing arrangement made under its 2019-2023 country development strategy also covers improved urban and rural living conditions, renewable energy infrastructure, and education and skills development.
“The initiatives aim to improve access and quality of service for Cambodians, and the business and investment environment,” ADB said.
As of December 31, 2018, ADB extended $3.5 billion to Cambodia, a large portion of that was used for agriculture, natural resources and environment, followed by transport, and water and urban infrastructure and services.