Cambodia GDP
The government estimated that economic growth will reach 6.5 percent in 2012, though it warned that debt woes still being played out in markets in Europe and the US could dampen this year’s prospects and said more efforts should be made to trade with other country in the region. With more than three-quarters of Cambodia’s export still going to the US and the European Union in the form of textiles, garments and shoes, Prime Minster Hun Sen said that Cambodia should aim to foster new trade links with other countries.
“We have to strengthen the economic foundations in Cambodia and not only focus on markets in the US and Europe but also look toward markets in Asia,” Mr. Hun Sen said in a speech at the annual Cambodia Outlook Conference in Phnom Penh. “Asian markets are giving a lot of hope to Cambodia for exports and income,” he added.
Garment export Cambodia
During the economic crisis in 2009, economists said that Cambodia should prioritize diversifying its economy so that it is less vulnerable to shocks abroad. But since then, very little has been done to achieve that goal, though more agricultural products in the form of rice, rubber and cassava are now beginning to be exported to countries such as China.
Also, contributing to economic growth this year, Mr. Hun Sen said the tourism sector was predicted to grow at 20.7 percent in 2012 compared with the previous year, after growing 15 percent in 2011. Visitors to Cambodia reached 2.88 million last year. Mr. Hun Sen also said that the agriculture sector was expected to improve upon its 3.3 percent growth last year, though he did not say where the grow would come from.
As for inflation, Mr. Hun Sen said that the government would continue to take measures to keep the inflation rate about 5.5 percent, even in the face of growing oil and food prices on international markets. “Rising petroleum and food costs could affect domestic economic,” he said.
Speaking at the conference, Faisal Ahmed, resident representative of the International Monetary Fund in Cambodia (IMF), offered a similar outlook in the economy and predicted economic growth to be 6.5 percent and 7 percent this year. He also said that China’s continually strong economy could act as an engine for growth in Cambodia.
“With growth in China… and we all have to prepare for it, it means a lot of good news for Cambodia, who get new trade channels and investment channels,” he said. “If only a fraction of that market comes from China, it means large growth.” There are signs that China’s economic growth is already having an effect. Cambodia’s Le Ye Rubber Company and the China National Food Industry Group Corp signed an agreement last year to export 1 million tons of cassava from Cambodia in 2012.
Cambodia GDP constant prices (source: http://www.indexmundi.com)
While prediction strong growth figures, Mr. Ahmed warned that Cambodia would have to ensure it increase the amount of tax revenue it generates in order to sustain the economy. Though revenues are increasing, many businesses here still get away without paying taxes. Although the figure look attractive on paper, economist say that more still needs to be done to ensure that benefits from economic growth are more inclusive. Observers say that most of the growth is concentrated in urban areas and that not enough is being done to develop the countryside, where most of the population still lives.
“Basic services on the rural level have been developing, but very slowly compared to urban areas,” Chan Sophal, president of the Cambodia Economic Association, told the conference, adding that the current national budget only allocates about $30 million out of $2.5 billion to commune councils for development.
“So each commune has $10,000 to $15,000,” he said. “It is really a problem.”
But Hang Chuon Naron, secretary-general of the Ministy of Economics and Finance, said that the government was prioritizing rural areas and had spent $160 million over the course of 2009 and 2010. Mr. Chuon Naron did not provide figures for spending in rural areas this year.
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