Cambodia ‘Not Immune’ to Global Crisis: IMF

The number of tourists visiting Angkor Wat have fallen, as economies abroad struggle with a global downturn.

By Chun Sakada, VOA Khmer
Original report from Phnom Penh
07 November 2008

Cambodia's economic growth rate will be slashed by more than half compared to 2007, as a financial slowdown continues to plague world markets, the International Monetary Fund said Friday.

Cambodia's economic growth rate will be around 6.5 percent for 2008 and will decrease to 4.25 percent next year, the IMF said, reporting findings of a visit in recent weeks. Those numbers starkly differ from Cambodia's halcyon growth rate of 10.25 percent in 2007.

Cambodia's "narrow production and export base" will subject it to the global markets, said David Cowen, deputy division chief of the IMF's Asia and Pacific Department.

The global economy has constricted amid ripples of a US sub-prime mortgage meltdown, shrinking consumer confidence, and tumbling stock markets.

"Cambodia's economy will not be immune to this slowdown," Cowen told reporters.

The IMF noted on its visit a sharp increase in inflation driven by higher fuel and food prices, as well as the weakened US dollar, which Cambodia follows, and heavy domestic demand for goods.

"Following several years of very strong performance, Cambodia's economy faces a number of challenging headwinds," the IMF said in a statement Friday. "After a robust start, growth momentum eased over the course of 2008, and more recently the economy has begun to experience adverse effects from global financial stress."

Cambodian officials have already acknowledged a slowdown, while large construction projects in Phnom Penh have been put on hold and microfinance lenders have reduced operations.


"Cambodia's economic slowdown is following the global financial crisis, which has slowed down foreign trade to Cambodia," Finance Minister Keat Chhon told reporters on Monday. "We must increase agricultural production and increase the [value added tax] on agricultural products for export. And we are trying to attract foreign investment by all means to come to develop in Cambodia."

Garment exports and tourist arrivals—the two main engines of Cambodia's economy—were both slowing, the IMF said, part of a "rapid downturn" in the economies of its trading partners.

The IMF also estimated that the overall inflation rate for 2008 would come to around 15.5 percent, following its highest point, 26 percent, in May.

The IMF commended the government on "steady budget implementation, particularly through the election period," and for improved tax administration.

IMF says Cambodian economic growth to slow in 2009

Friday, November 07, 2008

PHNOM PENH, Cambodia (AP) — Cambodia's economy will grow by a modest 4.8 percent next year due to slowdowns in key sectors and a drop in foreign direct investment caused by the global economic crisis, the International Monetary Fund said Friday.

The projected decline for 2009 comes after several years in which Cambodia, one of the poorest nations in Southeast Asia, has enjoyed strong growth. The economy expanded about 10.3 percent last year, according to the IMF.

Finance Minister Keat Chhon said in April that the economy grew an average 11.1 percent annually in 2004-2007. The government has forecast a growth rate of 7.2 percent for this year.

David Cowen, IMF's deputy division chief for Asia and Pacific Department, said growth this year would drop to around 6.5 percent, the same projection given by the Asian Development Bank last month.

He spoke at a press conference wrapping up his two-week mission to discuss the economic outlook with Cambodian officials and donor representatives.

"After a robust start, growth momentum eased over the course of 2008, and more recently, the economy has begun to experience adverse effects from global financial stress," the IMF said in a statement.

Foreign direct investment in 2009 is expected to be 25-30 percent lower than the $750 million the country has received this year, Cowen said.

Cowen said Cambodia, which has a very narrow production and export base, will not be immune to the slowdowns seen in the U.S., Europe and Japan.

He said garment exports — Cambodia's main dollar-earning industry — will weaken further, as will the tourism industry.

Construction, which has benefited from a recent real estate boom, will also slow down "partly as a result of tighter global liquidity conditions," the IMF statement said.

Cambodian growth to drop to 4.8 pct in 2009: IMF

PHNOM PENH, Nov 7 (Reuters) - The global slowdown will probably mean lower foreign investment in Cambodia and its economic growth is likely to slow to 6.5 percent this year and 4.8 percent in 2009, an IMF official said on Friday.

"We see that the external conditions will continue to be very challenging," David Cowen, deputy division chief in the Asia and Pacific department at the International Monetary Fund, said at the end of a visit to the Southeast Asian country.

"We are expecting foreign investment to be lower next year and that is one of the reasons we are forecasting a lower growth rate in the construction sector," he told a news conference.

In June the IMF forecast economic growth of 7 percent this year after 10.25 percent in 2007.

Cowen said Cambodia had attracted around $750 million in foreign direct investment (FDI) in 2008 but the figure was likely to be 25 to 30 percent lower next year.

Demand for garments, Cambodia's main export earner, was likely to drop and tourism might suffer due to the global slowdown.

Garments brought in $3.8 billion last year and the country attracted 2.1 million tourists, helped by the return of relative political stability.

Annual inflation hit 20 percent in September but was expected to go down to around 15 percent by the end of the year because of the recent sharp drop in oil prices, Cowen said.

Continuing weakness in oil plus lower food prices and weaker domestic demand could bring inflation down further to 7.5 percent next year, he added.

He put foreign reserves at $2.2 billion as of the end of September, supported by FDI inflows and aid money.

(Reporting by Ek Madra; Editing by Alan Raybould)

Cambodian economic growth to slow in 2008: UN

PHNOM PENH (AFP) — Cambodia's economic growth is expected to slow to 7.0 percent this year, the United Nations said Tuesday, warning that the country's exports remained too narrowly based on garments.

Growth is expected to be slower than last year, when the economy expanded by 8.5 percent, according to a report from the UN Economic and Social Commission for Asia and the Pacific (ESCAP).

While Cambodia's economy remains one of the region's most vibrant, "a key concern lay in the country's narrow export base which was considered vulnerable because of its dependence on garment exports," the report said.

The garment industry grew only 8.0 percent last year after suffering a dismal fourth quarter that saw orders plummet by nearly half, according to the World Bank.

The sector -- the country's largest source of foreign exchange -- faces increased competition from China and Vietnam, with further risks looming due to an economic downturn in the US, Cambodia's biggest market for textiles.

"For Cambodia, a significant slowdown of the US economy could have an economic fallout," said Suomi Sakai, acting UN resident coordinator.

Hang Chuon Naron, a secretary-general at Cambodia's finance ministry, said the government would try to prop up the garment sector by seeking higher wages for factory workers.

But he also said Cambodia needed to diversify its economy, and placed special emphasis on the country's tourism sector, which brought in 1.4 billion dollars last year.

Tourism revenues are expected to grow by at least 20 percent in 2008, according to the government.

The government "needs to look at how to ensure the development of tourism by developing the coastal areas," he said, adding that other tourism sites also needed to be created.