The government has revised down its 2023 growth forecast for the Cambodian economy to 5.6 per cent versus the 6.6 per cent it put forth in October, citing uncertainty about global economic growth tied to the Ukraine conflict, climate change and the Covid-19 crisis.
This was revealed by Ministry of Economy and Finance permanent secretary of state Vongsey Vissoth at a January 25 public forum on macroeconomic management and the 2023 budget law.
Although fallout from Covid-19 has subsided, the Ukraine crisis and climate change will put significant downward pressure on global economic growth, with the US, EU, China and other major buyers of Cambodian goods facing particularly grim prospects, he stated.
The latest growth forecast figure – which Vissoth affirmed had been personally approved by Prime Minister Hun Sen – is considerably greater than the 2.7-per-cent growth rate estimated for the global economy, he noted.
He argued that the Kingdom’s economic growth is underpinned by the increasing diversity in its export mix, with textile-related items accounting for a considerably smaller share than before.
“To deal with these difficulties, we must minimise the negative impact, and seize opportunities for progress, because every crisis represents an opportunity,” he stressed.
Vissoth remarked that ASEAN as a whole could achieve better economic growth this year than the global average as geopolitical conflicts among major powers shift more attention and investment to the Southeast Asian bloc’s member states.
According to the finance ministry’s “Cambodia’s Macroeconomic Situation at a Glance 2022-2023” report, growth in export sectors, especially the garment sector, is pegged to decelerate to 5.5 per cent this year, due to weaker external demand, particularly from the EU market.
It predicted 11.7 per cent growth in the non-garment manufacturing sector, driven by food and beverages for the domestic market as well as furniture, solar items and electronic components for export.
Wholesale-and-retail trade, construction, real estate, and agriculture are expected to grow by 6.5 per cent, 1.1 per cent, 1.2 per cent, 1.1 per cent, respectively, it said, adding that the “tourism sector – hotel and restaurants – is expected to continue rising with the growth of 32.7 per cent” as regional and international travel picks up.
The year-on-year consumer price inflation is anticipated to slow down to around 3.2 per cent in 2023, as oil and other commodity prices gradually return to normal levels, it added.
However, the ministry warned that the economic outlook faces several downside risks, listing six potential threats, including “the rise of regional and global geopolitical tensions” and “further global economic slowdown”.
The third risk was two-fold: “the tightening of monetary policy longer than [expected], especially the US”, along with “the appreciation of US currency”, which the report said “could affect the flow of investment and trade”.
The remaining three were: “the rise of debt tension, particularly in emerging [market] economies”; “the fragmentation of [the] global economy”, which the report said could “affect international cooperation”; and “climate change and natural disaster[s]”.
Cambodia Chamber of Commerce (CCC) vice-president Lim Heng previously commented to The Post that Cambodia’s economic growth would improve in 2023, powered by its “Living with Covid” policy, a steady flow of tourists, and an uptick in investments that he attributed to the Kingdom’s free trade agreements (FTA) as well as government initiatives to grow the domestic production capacity.
And in a December 7 statement, the World Bank forecast Cambodia’s economic growth at 5.2 per cent for 2023, “as increased hiring supports rising domestic consumption and as inflation recedes”.