Singapore

World Bank pegs Cambodia’s economic growth for 2023 at 5.5 percent

Sreekanth Ravindran / Khmer Times Share:
Maryam Salim, Country Manager for Cambodia, World Bank. KT/Pierre Roussel

An expanding agricultural sector along with improved access to regional markets will accelerate the growth of the national economy to 5.5 percent in 2023, the World Bank made the forecast yesterday.

This came as the UN Organisation launched the ‘Cambodia Economic Update 2023’ at Raffles Hotel Le Royal, Phnom Penh, in the presence of World Bank staff, top governmental officials, diplomats and dignitaries.

The 20th edition of the biannual report maintains a special focus, which is ‘From Spending More to Spending Better – Towards Improved Human Development Outcomes’.

The report says that Cambodia’s economic recovery solidified in 2022 with real growth accelerating to 5.2 percent. “The economy is firmly on a path to recovery. Initially led by the strong performance of export-oriented manufacturing, growth drivers are rotating to the services and agriculture sectors. Driven by pent-up consumer demand and the return of foreign tourists, the overall contribution of the services sector to economic growth is returning to the 2019 levels.”

 

Speaking at the launch, Maryam Salim, Country Manager for Cambodia, World Bank, said that the agriculture sector is benefitting from improved access to regional markets, attributing it to the newly ratified bilateral and regional free trade agreements.

“Cambodia’s real growth for 2023 is projected to accelerate further, reaching 5.5 percent. The outlook is, however, subject to downside risks. An extended slowdown in external demand could weaken Cambodia’s export-oriented manufacturing, which generates about 40 percent of total employment in the industrial sector. Continued global financial tightening could affect the highly leveraged financial sector.”

Maryam pointed out that a renewed oil price shock stands a chance to stoke inflation and dampen domestic consumption. “Domestically, concentration of domestic credit in the construction sector remains a key risk to financial stability. Therefore, Cambodia’s macroeconomic policy must continue to support growth and employment.

“In addition, safeguarding financial stability remains a priority. To enhance the long-term resilience and competitiveness of the economy, efforts are needed to further promote export product diversification.”

Sodeth Ly, Senior Economist, Macroeconomics, Trade and Investment Global Practice at The World Bank, said that there are high signs that Cambodia will return to seven percent growth in the coming years. “Tourism will be the major driver of the economy. Rise in tourism numbers will trickle down into other sectors, making the post-pandemic recovery intense.”

He said that Cambodia fortunately has overcome the global inflationary pressure. “Foreign Direct Investments are improving during the post-pandemic period. And Cambodia will also improve from supply chain reconfiguration. The infrastructure growth within Cambodia will contribute to growth.

“The support issued by other nations and multilateral agencies provided a great relief for Cambodia during the Covid time. It helped in filling the financial gap.”

Serdar Yilmaz, Lead Public Sector Specialist, The World Bank, said Cambodia has done an incredible job on the economic front. “Almost all sectors benefitted from the government’s increased spending. Social sectors including health and education received maximum funds during the post-pandemic period time, making it a great milestone.”

The Special Focus section of the report, which examines public expenditure management during the past decade, points to a significant increase in public spending, particularly in the social sectors, thanks to increased fiscal space. This is broadly in line with the government’s priorities.

“Cambodia’s budget allocation boost has been driven partly by across-the-board salary increases. As a result, the country’s public sector workers currently earn a higher average salary than their private sector counterparts. However, challenges in human resources management remain. The education spending increase has largely gone toward salaries,” she said.

In the medium term, growth is expected to rise to 6 percent, bolstered by strong goods and services exports and a substantial increase in investment, especially under public-private partnerships for large infrastructure projects such as seaports and roads.

Cambodia can aid this growth by investing in connectivity infrastructure and human development, safeguarding financial stability, and promoting diversification of exports to enhance the economy’s resilience and competitiveness, the report asserts.

A special focus section of the report examines how Cambodia has been able to increase social sector spending in recent years, notably on health and education, while noting that the quality of that spending could be improved.

A stronger focus on both allocative and operational efficiency could help address the uneven distribution of teachers among grade levels and low public trust in state health facilities, it further asserts.

The Cambodia Economic Update focuses on short- and medium-term macroeconomic developments and is published twice a year.

Related Posts

Previous Article

Cambodian durian sector exploring export opportunities to China

Next Article

Dara Sakor International Airport hits another delay