In its latest report, the
World Bank has revised its forecast of the kingdom’s real economic growth for
2017, lowering it by 0.1 percentage points to 6.8 percent.In April this year,
the World Bank reported that Cambodia’s outlook for growth remains favourable
in the medium term, with growth projected to reach 6.9 percent in 2017 and
2018, driven mainly by the resilient construction and garment sectors.According
to the World Bank’s latest report, titled “East Asia and Pacific Economic
Update October 2017”, Cambodia’s economy will grow at a rate of 6.8 percent
this year and 6.9 percent in 2018.
The report says the revision
follows a rise in real wages in the country and a decline in export prices.
Likewise, export growth for textiles decelerated during the first half of 2017,
sinking to 5.4 percent year-on-year, compared with 8.4 percent in 2016.“The
growth outlook, however, is favourable because exports of electrical machinery,
equipment and parts have picked up, partly offsetting the deceleration,” the
report notes, adding that new exports ¬– including machinery, appliances,
boilers and sound recorders – accounted for 8.7 percent of total exports in
2016. In 2010, they made up less than two percent of total exports.
In addition, the agriculture and tourism sectors have experienced a recovery
this year, the report notes. Tourist arrivals grew at a rate of 12.8 percent
during the first six months of the year, compared with five percent in 2016.World
Bank senior economist Ly Sodeith attributed the slowdown in garment export
growth to strong competition from low-cost labour economies like Myanmar and
Bangladesh, which have begun taking advantages of opportunities in their
garment and textile industries.“The slow growth of exports for the garment
industry and the slowdown of construction activities have hindered the growth
of Cambodia’s real economic growth this year,” Mr Sodeith said.
Mr Sodeith also said the garment industry will continue to experience slower
growth rates due to the rising cost of labour in the country. According to the
analyst, Cambodian labour is now more expensive than many other countries in
the region.Mr Sodeith said the government should direct efforts towards
developing skill intensive industries that create high value products,
including electronics, assembling and machinery industries.
“We have to increase the added
value of our garment industry to make it stronger. Likewise, we need to move
higher in the value chain and into industries like assembling and electronics.“We
should foster the development of these industries by increasing the skill level
of our labour, ensuring affordable and competitive power rates, and a stable
and high-quality power supply to allow us to compete with neighboring
countries,” Mr Sodeith said. “We are moving to a lower middle-income
economy, so we have to adopt high-value industries,” he added.
According to the report, the macro-financial stability of the country shows
several signs of improvement, including a slowdown of the credit growth from 25.8
percent in 2016 to 18.2 percent in mid-2017, as well as a rise in foreign
currency deposits.Meanwhile, in 2016, the current account deficit waned to 10.2 percent
of GDP, compared with 11.5 percent in 2015. Foreign currency reserves reached
$7.8 billion, which is equivalent to six months of imports.
“Cambodia has to keep
improving its competitiveness in other sectors – especially when it comes to
exports – by improving the power supply and lowering the cost of electricity.“This will allow new industries,
new clusters, to enter Cambodia and improve the business environment by
lowering the cost of starting a business in the kingdom, which is high at the
moment,” the report states. Sudhir Shetty, the World Bank’s chief
economist for East Asia and the Pacific, said that Cambodia’s exports are based
primarily on garments, which, given current wage levels and past volatility of
the American dollar, puts the country’s competitiveness at risk.
Source: Khaleej Times, U.A.E Friday, 06 October 2017