Slowdown in garment exports from Cambodia

October 04, 2012 (Cambodia)
Asian Development Bank (ADB)

The slump in global markets has depressed demand for Cambodian products, leading to reduced growth forecasts by the Asian Development Bank (ADB) for 2012 and 2013.

“Falling global demand, especially in Europe and the US, means that the industry sector will grow at a slower pace this year,” said ADB Senior Country Economist for Cambodia Peter Brimble. “However, buoyancy in the services sector, particularly tourism, offsets to some extent the slowdown in garment exports.”

Forecasts in ADB’s Asian Development Outlook 2012 Update (ADOU 2012), released, predict Cambodia’s gross domestic product to grow by 6.4% in 2012 and 6.8% in 2013, a slight drop from ADB’s earlier projections of 6.5% and 7% in the ADO of April 2012.

Demand by major trading partners for Cambodia’s garment and footwear exports has softened this year, with US imports of garments and footwear from Cambodia growing by only 2.6% to $1.5 billion in the first 7 months of 2012, and imports to EU increasing by 20.9% to $798 million in the first 6 months, both decelerating sharply over 2011 levels.

Dry weather has hurt agricultural production in some provinces. Other sectors performing well include transport, finance, construction and tourism. Approved investment in construction jumped by almost 85% to $1.4 billion in the first 7 months. Tourist arrivals jumped by 27% to 1.8 million by mid-year.

The current account deficit is expected to widen more than previously anticipated, in light of upward revision of the 2011 current account gap and the weaker export outlook. The report estimates the current account deficit at 9.8% and 9.7% of GDP in 2012 and 2013.

Inflation forecasts are lower than previous estimates both for this year and next, driven by more moderate price increases for food and fuel. The ADOU 2012 projects inflation of 3.0% for 2012, with the rate picking up to 4.5% in 2013.

Gross official reserves increased by 6.6% to $3.2 billion in the first half of 2012, covering 4.3 months of imports of goods and services.