IMF says Cambodian economy to grow 6.5 per cent, but warns of risks

Feb 28, 2012
DPA

Phnom Penh - Cambodia's economy is expected to grow 6.5 per cent in 2012, up from 5.75 per cent last year, the International Monetary Fund said in its annual review, adding that government policies to boost the investment climate were paying off.

However, in its assessment, which was released overnight, the US-based body warned the kingdom's economy was vulnerable to the global slowdown, adding that its narrow export base made it susceptible to 'significant downside risks.'

Cambodia's economy is based on agriculture, garment manufacturing, tourism and construction, with the last three helping to buoy the economy last year. The garment industry was the largest foreign exchange earner in 2011 worth 3.75 billion dollars in exports.

IMF forecasts Cambodia's economic growth could reach 6.5% within year

PHNOM PENH -- The International Monetary Fund (IMF) predicted that Cambodia's Gross Domestic Product (GDP) growth would reach 6.5 percent this year, according to the IMF's press release on Tuesday.

The prediction is based on the buoyant garments exports, increasing tourist arrivals, and a gradually improving real estate sector as well as increasing agricultural sector, said the press release.

However, it said that the fragility of the global recovery exposed Cambodia's narrow export base to significant downside risks.

“Cambodia is highly sensitive to economic activity in the U.S. and Europe, which account for about two thirds of its total exports and the bulk of high-end tourist arrivals,” it said, adding “any immediate financial spillovers, however, would likely be limited and mostly indirect.”

IMF says Kingdom’s GDP growth now less than 6%

Friday, 09 December 2011
Don Weinland
Phnom Penh Post

The International Monetary Fund yesterday said Cambodia’s gross domestic product for 2011 would grow at slightly less than 6 per cent, a decline from the 6.7 per cent projection announced in October.

In addition, the IMF said the country’s 35 per cent credit growth could approach unsafe territory if left unchecked.

The latest overall GDP outlook was subject to further evaluation given flood damage and the volatility associated with this year’s agricultural output, IMF Asia and Pacific Deputy Division Chief Olaf Unteroberdoerster said yesterday.

Cambodia economy to grow 7% in 2012: IMF

Dec 09, 2011
AP

WASHINGTON - The International Monetary Fund said on Thursday that Cambodia's economy is set to grow by 7.25 per cent next year, buoyed by garment exports and growing tourist arrivals.

The fund reports that recent floods have hurt agriculture in the final quarter of this year, but the non-agricultural gross domestic product is forecast to grow in 2011 at its fastest rate in four years.

The Washington-based fund's predictions came in a statement after an annual consultation with Cambodia on its economy. A visiting IMF team ended its mission on Thursday.

IMF Puts 2011 Growth Rate at 7.5 Percent

Thursday, 08 December 2011
Chun Sakada, VOA Khmer | Phnom Penh

“This is a positive sign for Cambodia.”

Cambodia’s economic growth rate is expected to reach 7.5 percent, the International Monetary Fund said Thursday.

Growth was bolstered by strong garment exports, increased tourism and a slowly recovering real estate sector, IMF said in a statement. Agriculture was strong in the first three quarters of the year, it added.

Olaf Unteroberdoerster, IMF’s deputy division chief for the Asia Pacific, told reporters that an IMF mission had recommended improved debt management and a better debt strategy in meetings with senior officials. The 11-day mission also found a need for the government to focus on agricultural growth and rural infrastructure, he said.

IMF Team Completes the 2010 Article IV Consultation Discussions with Cambodia

Olaf Unteroberdoerster, a high ranking IMF economist for Asia-Pacific, during the press conference held in the afternoon of 10 Sept 2010 (Photo: Ly Meng Huor, RFI)

September 10, 2010
Press Release No. 10/334
Source: IMF

An International Monetary Fund (IMF) mission from Washington, D.C. visited Cambodia August 30 to September 10, 2010, to conduct the annual Article IV discussions.1 During the visit, the mission took stock of recent economic and financial developments and held policy discussions with ministers and senior officials of the Royal Government of Cambodia on their macroeconomic and financial policies. The mission also met a wide range of representatives from the business community and Cambodia’s development partners.

A broadening export-led recovery is taking hold since the beginning of the year. Real GDP growth is projected to reach 4½–5 percent in 2010, a significant turnaround from 2009. Garment exports and tourist arrivals, notably by air, are bouncing back, both growing between 10 to 20 percent (y/y) in the second quarter of 2010. Construction activity, however, appears to remain sluggish with growth of most related imports still negative, while a late start of the rainy season may dent agricultural output growth.

Amid ample liquidity in the banking system, credit growth has turned the corner and, on current trends, could run well above 20 percent in the second half of the year. Headline CPI inflation is projected to average 4 percent this year.

Significant risks continue to cloud growth prospects. The fragility of the global recovery exposes Cambodia’s narrow export base with its heavy reliance on the U.S. and European markets to significant downside risks. Over the medium term, efforts to strengthen the business environment and enhance public sector revenues and service delivery are important to overcome major downside risks to growth. On the other hand, a better-than-expected return to medium-term investments in the power sector and rural infrastructure could offer significant upside potential.

Against this background, discussions focused on the dual policy challenge to safeguard hard-won gains in macroeconomic stability and policy credibility, and lay the foundations for broader-based and inclusive growth.

With regard to fiscal policies, the mission was encouraged by the fiscal outturn through July suggesting that the budget target of a gradual fiscal consolidation is on track. The rebound in tax revenue is broadening, with both direct and indirect cumulative tax collection through the first seven months rising by 8 and 18 percent (y/y), respectively. However, the mission advised that further fiscal adjustment is needed for 2011 and the medium term. As the economic recovery gains traction, the recourse to domestic financing, and thus the injection of significant additional riel liquidity, should be eliminated to avoid undue external and inflation pressures. Moreover, further consolidation would enable Cambodia to retain its favorable debt sustainability outlook and rebuild its capacity to absorb potential future shocks.

The mission strongly supports the government’s emphasis on further improving revenue administration. Gains in tax collection offer the best hope for Cambodia to meet the dual objective of securing fiscal sustainability and mobilizing resources for its development needs. In addition, further progress along the government’s public financial management reform program will be critical to secure gains from enhanced revenue administration and improve the effectiveness of social priority spending

On monetary policies, the mission discussed ways to enhance Cambodia’s monetary independence, including elements of a strategy to address the high degree of dollarization. To a large extent dollarization reflects Cambodia’s unbalanced and narrow growth over recent decades that was driven by the dollarized urban export and tourism centers. Therefore, a more diversified development with greater emphasis on agriculture and rural areas, where the riel is commonly accepted, could over time produce a significant decline of dollarization. In addition, based on international experience of countries with a successful de-dollarization strategy, the incentives for greater use of riel could be increased.

The mission commended the National Bank of Cambodia for taking actions to safeguard the health of the banking system. Considering the findings of the IMF/World Bank Financial Sector Assessment Program mission in March 2010, the mission and the authorities agreed that robust supervision of banks and strict enforcement of prudential regulations remain key to sustained stability. Moreover, the supervisory framework and resources will also need to keep pace with the development of a broader financial system.

Global economic rebalancing and greater reliance in Asia on domestic sources of growth offer significant opportunities that Cambodia should seize. The government’s recent initiatives to improve the business environment and address infrastructure bottlenecks are timely. The mission looks forward to the implementation of the Anti-Corruption Law which could significantly reduce the cost of doing business, and thereby improve Cambodia’s international competitiveness. Promoting agricultural development and rural infrastructure investment, including by the recently adopted Rice Policy, will broaden Cambodia’s sources of growth and make future development more inclusive and sustainable. Improving the quality and dissemination of key economic statistics will serve to further enhance policy credibility and result in better informed business decisions.
---------------
(1) Under the Article IV consultation, IMF staff undertake annual surveillance and analysis of economic developments and policies of member countries for discussion by the Executive Board. The last Article IV consultation with Cambodia was concluded in November 2009.

IMF sees Cambodian GDP growing 4.5-5.0 pct in 2010

Fri, Sep 10, 2010
AsiaOne

PHNOM PENH - Cambodia's economy may grow 4.5-5.0 percent this year after contracting 2 percent in 2009 due to the global economic crisis, the International Monetary Fund said on Friday.

"Garment exports and tourist arrivals, notably by air, are bouncing back, both growing 10 to 20 percent year-on-year in the second quarter of 2010," the IMF said in a statement.

"Construction activity, however, appears to remain sluggish with growth of most related imports still negative, while a late start of the rainy season may dent agricultural output growth," it added.

Cambodian Prime Minister Hun Sen has said the economy would grow around 5 percent this year and that resilient agricultural output had helped the country avoid recession in 2009.

The Finance Ministry estimated GDP grew 0.1 percent last year, although the World Bank said it shrank 2 percent because of poor garment exports, lower tourism receipts and weak foreign direct investment.

The IMF said the outlook for this year was clouded by the fragility of the global recovery, with Cambodia's narrow export base heavily reliant on demand from the United States and Europe for garments.

"Global economic rebalancing and greater reliance in Asia on domestic sources of growth offer significant opportunities that Cambodia should seize," the IMF said.

It said it was looking forward to the implementation of a recently passed anti-corruption law, which could help reduce the cost of doing business and improve Cambodia's competitiveness.

Cambodia economy to grow up to 5% in 2010: IMF

Friday, September 10, 2010
AFP

PHNOM PENH — A strong recovery in tourism and the key garment industry helped Cambodia's economy perform a "significant turnaround" this year, with projected growth of up to five percent, the IMF said Friday.

Cambodia, which saw its major industries hit by the global financial crisis, is expected to experience a 4.5 to five percent economic expansion this year and six percent growth in 2011, the International Monetary Fund said.

Garment exports and tourism are at the forefront of the rebound, with 10 to 20 percent growth in the second quarter, according to Olaf Unteroberdoerster, senior economist at the IMF's Asia Pacific department.

"Real GDP (gross domestic product) growth is projected to reach 4.5 to 5 percent in 2010, a significant turnaround from 2009," he said.

Agriculture was said to be another factor behind the forecast expansion in output, and Unteroberdoerster urged development in the sector as well as rural infrastructure investment to help broaden Cambodia's sources of growth.

But construction activity, another factor behind the country's double-digit growth before the global downturn, appears to have remained sluggish, he said.

Since the beginning of the financial crisis in 2008, Cambodia's government has issued more optimistic economic projections than international financial organisations.

While the IMF estimated Cambodia's economy would contract around 2 percent in 2009, the government forecast 0.1 percent growth. The official rate has not been released.

Cambodia used garment exports and tourism to help improve its fortunes after the 1975-79 Khmer Rouge regime and several decades of civil war left its economy and infrastructure in tatters.

Garment exports were hit by a drop in world demand caused by the financial crisis, but Ministry of Commerce figures showed exports increased by over 13 percent in the first seven months of the year.

In the first half of 2010 a total of 1.2 million foreign tourists visited Cambodia, up from 1.1 million in the same period the year before.

Economic outlook improves for Cambodia

Fri, 9 Oct 2009
ABC Radio Australia

Cambodia says its foreign currency reserves have risen above two and a half billion US dollars, despite forecasts that the country's economy would contract this year.

Prime Minister Hun Sen says his country has increased its international reserves by more than 20 per cent since the end of 2008.

His comments came during a speech marking the 30th anniversary of the rebuilding of the country's national bank, which was destroyed by the Khmer Rouge.

In September the International Monetary Fund (IMF) predicted Cambodia's economy would contract by two-and-three-quarters percent this year because of the impact of the global economic slowdown.

But the IMF praised the national bank for its supervision of commercial banks hit by non-performing loans.

Hun Xen gloats on positive economic figures, but dismisses negative figures as "just a figure"

(Photo by: Heng Chivoan)

PM again dismisses 2009 GDP forecasts

Tuesday, 29 September 2009
Nguon Sovan
The Phnom Penh Post

PRIME Minister Hun Sen on Monday dismissed recent GDP growth forecasts by international organisations, urging the population to concentrate on work rather than predictions on the Kingdom’s economic output for 2009.

Speaking Monday at an inauguration ceremony for a new Ministry of Tourism building in Phnom Penh, Hun Sen again predicted that the agricultural sector would flourish this year.

“Whatever the forecast is – positive or negative – it is not important because it is just a figure,” he said.

The Asian Development Bank (ADB) last week projected that the agricultural sector would be one of the few bright spots for the Kingdom’s economy, forecasting 5 percent year-on-year growth for 2009.

But ADB and the International Monetary Fund both lowered their predictions last week for Cambodian growth in 2009, to 1.5 percent and 2.75 percent contractions respectively.

In contrast, the London-based Economic Intelligence Unit, which has traditionally pitched its forecasts below the ADB in particular, this month revised upwards its prediction for the economy from -3 percent to -1.5 percent for this year. It cited signs of a global recovery for the improved forecast.

Nevertheless, Hun Sen said, such predictions remain meaningless to most of the population.

“The most important issue is the people’s living conditions.... If they have enough water and food, if there are people that are dying from starvation or not,” said Hun Sen, adding that most Cambodians had not shown any interest in GDP forecasts previously, even when the Kingdom experienced double-digit growth in recent years.

Earlier this year the government predicted GDP growth of about 6 percent for 2009, although some officials have since said that the economy would likely expand at around half this level.

IMF: 15% garment sector decline, double digits drop in air arrivals, construction slowdown, but ... all is fine in Hun Xen's Cambodia!

Statement at the Conclusion of an IMF Staff Mission to Cambodia

Press Release No. 09/325
September 24, 2009
Source: IMF

The following statement was issued in Phnom Penh on September 23 at the conclusion of an International Monetary Fund (IMF) staff mission to Cambodia:

“An IMF mission visited Cambodia during September 9-23, 2009 to conduct the annual Article IV discussions. During the visit, the mission took stock of recent economic and financial developments and held policy discussions with ministers and senior officials of the Royal Government of Cambodia on their macroeconomic and financial policies. The mission also met a wide range of representatives from the business community and Cambodia’s development partners.

“The global economic crisis is having a larger impact on Cambodia’s economy than previously anticipated, and as a result, real GDP growth is now projected to be negative 2¾ percent in 2009.

• Garment export volumes are projected to decline by 15 percent this year, mainly due to lower consumption in the United States (Cambodia’s key garment export market) and intense competition from regional producers, who have raised their market share by strengthening competitiveness.

• In the tourism sector, air arrivals have fallen by double digits, reflecting the global recession, rising unemployment, and falling incomes in most of Cambodia’s tourism-source countries. As a consequence, overall tourism spending is sharply lower, despite the increase in same-day and land arrivals from neighbor countries.

• With few notable exceptions, work on large construction projects has slowed significantly in the wake of falling property prices. New project approvals are sharply lower, and imports of construction materials are down significantly compared to 2008, with bank lending to the property also down.

• Agricultural production is a bright spot, with a good harvest expected in 2009. Investment in rural roads and irrigation systems should raise productivity and reduce operating costs in the period ahead.

“Looking to 2010, there are some hopeful signs that the global downturn may be bottoming out. A pick-up in external demand is expected to lead to a modest recovery in Cambodia’s economy. Growth in 2010 is projected at about 4¼ percent, though risks remain tilted to the downside, given uncertainties over the strength of the global recovery.

“With lower domestic demand and commodity prices, inflation pressures have eased in 2009, with headline inflation expected to be around 5¼ percent (year-on-year) by end-2009. Inflation should remain in the mid-single digits through 2010. However, vigilance is required to ensure that fiscal stimulus does not lead to renewed inflation pressures.

“Policy discussions focused on how best to provide adequate support targeted at priority sectors, while at the same time maintaining macroeconomic stability and low inflation.

“With respect to fiscal policy, the mission welcomed indications that the 2009 budget’s revenue target would likely be met, largely due to commendable administration efforts. However, on current trends, very large increases in the civil service and military wage bill and higher capital spending are projected to raise the budget deficit to 6¾ percent of GDP in 2009 from around 2¾ percent in 2008. The mission estimated that domestic financing of this deficit would imply a drawdown of government deposits of about 1¼ percent of GDP, reversing a long trend of deposit accumulation. This situation bears close watch, since domestic financing of deficits in the past has contributed to macroeconomic instability, placing pressure on the exchange rate and consumer prices. The mission noted that over the remainder of the year, efforts should focus on ensuring continued strong revenue collection and avoiding non-priority spending.

“For 2010, the mission recommended the budget aim to reduce the deficit to under 5½ percent of GDP. This level of deficit would eliminate the need for further large-scale domestic financing, while at the same time provide adequate fiscal space for spending on priority sectors and pursuing key development objectives. The mission cautioned against allowing significant increases in the wage bill to become entrenched, as this could risk crowding out spending on priority sectors such as health, education, and operations and maintenance, and further increase domestic financing needs if not accompanied by significant revenue gains.

“With respect to monetary policy, the mission noted that ample liquidity now exists in the banking system, and agreed with the authorities that there was no need for a reduction in the reserve requirement. The mission also noted that greater exchange rate flexibility through limiting intervention to smoothing volatility would help protect international reserves, deepen the foreign exchange market, and allow the exchange rate to play a greater role in facilitating external adjustment.

‘The mission commended the National Bank of Cambodia for taking actions to safeguard the health of the banking system. As in many other countries, the downturn in Cambodia’s growth has been accompanied by rising non-performing loans at banks. The mission and the authorities fully agreed that close supervision of banks and strong enforcement of prudential regulations needs to continue, especially proper asset classification and provisioning of non-performing loans.”

Cambodia’s Economy Will Contract 2.75% in 2009, IMF Forecasts

By Tracy Withers

Sept. 25 (Bloomberg) -- Cambodia’s economy will contract 2.75 percent this year amid a slump in garment exports, tourist spending and construction, the International Monetary Fund said in its annual assessment.

“The global economic crisis is giving a larger impact on Cambodia’s economy than previously anticipated,” the IMF said in the Article IV report published in Washington. Garment export volumes may slump 15 percent this year, it said.

In Cambodia, the proportion of garment shipments to total exports is higher than any country except Bangladesh and Haiti, according to World Trade Organization data. The U.S. purchases about 70 percent of production from the nation’s apparel plants.

Garment exports are falling because of lower U.S. consumption and increased competition from manufacturers in other Asian nations, the IMF said.

Tourist arrivals have declined and spending is lower as a global recession affects international travel, the IMF said. Work on large construction projects has slowed as property prices slump, it said.

In 2010, the economy may grow 4.25 percent amid a global recovery which may bolster demand for Cambodia’s exports, the IMF said.

To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net.

IMF predicts Cambodian economic growth to be over 4% in 2010 ... but for 2009, it's 2.75% below 0!

PHNOM PENH, Sept. 23 (Xinhua) -- The economic growth of Cambodia is projected at about 4.25 percent in 2010, the press release from International Monetary Fund mission here said on Wednesday.

But this year, as a result of the global crisis which has a larger impact on Cambodian's economy than previously anticipated, the real GDP growth is now projected to be negative 2.75 percent, IMF said.

"If we look into 2010, there are some hopeful signs that the global downturn may be bottoming up," David Cowen, a senior official for the Asia Pacific Department of IMF said at Wednesday's press conference.

"A pick up in external demand is expected to lead to a recovery in Cambodia's economy and the growth in 2010 is projected at about4.25 percent, though risks remained tilted to the downside, given uncertainties over the strength of the global recovery," he said.

Cambodian garment exports in 2009 are expected to decline by 15percent, mainly due to lower consumption in the United States. Andin tourism sector, air arrivals have fallen by double digits. Moreover, the working on large construction projects has slowed significantly in the wake of falling property prices.

"But agriculture production is a bright spot with a good harvest expected in 2009," the press release from IMF said.

Cambodia's economy hit hard by U.S. slowdown - IMF

PHNOM PENH, Sept 23 (Reuters) - Cambodia's economy, one of the fastest growing in Southeast Asia just two years ago, will probably contract by about 2.75 percent this year, hit hard by the slowdown in the United States, the IMF said on Wednesday. "The global economic crisis is having a larger impact on Cambodia's economy than previously anticipated," David Cowen, deputy division chief for the International Monetary Fund's Asia and Pacific Department, told a news conference.

However, the economy will rebound next year with growth of 4.25 percent, added Cowen, who led a team that recently met with local finance officials as part of an IMF mission to Cambodia.

After decades of war and upheaval, including the Khmer Rouge "killing fields", Cambodia witnessed an unprecedented boom before the global financial crisis struck, its economy expanding at around 10 percent annually in the five years leading up to 2008.

The growth, fuelled mainly by garment manufacturing, tourism and real-estate development, came to an abrupt halt during the global recession. Garment export volumes are likely to fall by 15 percent this year, hit by the weak U.S. economy, Cowen said.

Tourist arrivals have fallen by double digits, Cowen said, noting that recent signs of improvement may reflect day-tripping arrivals from across the border rather than wealthier tourists from other parts of the world whose spending lifts the economy.

"Exports are contracting. So we are likely to see negative export growth in Cambodia in 2009. Imports are contracting at an even faster rate," he added, noting that some of that reflected falls in fuel prices.

"The overall level of petroleum imports will be down quite significantly this year," he said.

He expected annual inflation of more than 5 percent near the end of 2009, rising further to about 6 percent next year.

Even though the economy remains one of Asia's smallest, with gross domestic product of around $8.9 billion, international investment had been rising sharply, flowing heavily into the hotel sector, before reversing course in the financial crisis.

Foreign direct investment probably nearly halved to an estimated $490 million this year from $815 million in 2008, with the drop led mainly by construction investment, Cowen said.

Large construction projects have slowed, new project approvals are sharply lower and imports of construction materials are down significantly from last year, he added.
"There's negative growth in construction imports and negative growth in consumer imports."

Bank lending for property was also down, he said, following a real-estate boom that turned the once-sleepy capital into a building site.

But Cambodia's vast agricultural sector, which makes up about 34 percent of the economy, has held up well, with a good harvest expected this year.

And there's ample liquidity in the banking system.

"There has been healthy deposit growth in the system as a whole this year, in part due to very attractive term deposit rates that banks are paying in Cambodia. We have expressed some concern that these high deposit rates could have some impact on bank profitability going forward."

(Writing by Jason Szep; Editing by Alan Raybould)

IMF economic outlook for Cambodia is bleaker than that of the ADB: 2.75% GDP contraction

IMF says Cambodia's economy will contract 2.75 per cent this year

Sep 23, 2009
DPA

Phnom Penh - The International Monetary Fund revised down its forecast for Cambodia's economy Wednesday, predicting that gross domestic product (GDP) would contract 2.75 per cent in 2009.

That is sharply lower than its previous forecast of a 0.5-per-cent drop.

The IMF figures follow the release of numbers Tuesday by the Asian Development Bank, which foresees Cambodia's economy contracting 1.5 per cent this year.

Speaking to reporters in Phnom Penh, IMF official David Cowen said the global economic crisis was having a more significant impact than previously expected on the kingdom's economy, which suffers from a narrow production base.

Cambodia's economy rests on four key pillars - agriculture, tourism, construction and garments. The last three have all been badly hit by the crisis.

The IMF noted in its press statement that agricultural production was 'a bright spot with a good harvest expected' this year.

'Investment in rural roads and irrigation systems should raise productivity and reduce operating costs in the period ahead,' the IMF stated.

But the three remaining pillars have performed worse than expected. Garment exports, for example, are expected to decline 15 per cent, a drop Cowen blamed in part on weak retail demand in the key US market, the destination for most Cambodian garments.

But he said the country also remains less competitive than other garment exporters in the region, and as a result has lost some market share to countries such as Bangladesh and Vietnam.

Tourism too has been disappointing if measured by spending rather than actual visitor numbers. The IMF said arrivals by air - typically indicating higher-spending tourists - had fallen 'by double digits' due to the global economic crisis affecting visitor nations.

'As a consequence, overall tourism spending is sharply lower, despite the increase in same-day and land arrivals from neighbouring countries,' the IMF said.

The remaining pillar - construction - has been hit hard with many projects shelved or put on hold following a property boom that ended abruptly last year.

'New project approvals are sharply lower, and imports of construction materials are down significantly compared to 2008, with bank lending to the property [sector] also down,' the IMF noted.

Foreign direct investment is also expected to end the year sharply down, the IMF said, and is projected at 490 million US dollars this year versus an estimated 815 million US dollars last year.

The IMF expects a turnaround next year, with growth predicted at 4.25 per cent amid signs that the global downturn is bottoming out. However, it cautioned that the risks for Cambodia remain 'tilted to the downside,' a sharp reversal after a decade in which the nation regularly enjoyed annual double-digit growth.

Year 2009 in Cambodia: the year of recession? [... not according to Dr Hun Xen and his CPP comrades]

Pailin (Cambodia). 19/01/2008: Cassava roots harvest. Even if the agricultural sector seems to be less hit by recession, the prices of some products, like cassava root, are getting lower. (Photo: John Vink/ Magnum)

12-03-2009
By Laurent Le Gouanvic
Ka-set

After economic growth soared into record double-figures, one may wonder whether Cambodian economy is about to suffer its first recession in 2009. This is what economists at the International Monetary Fund (IMF) fear in their conclusion released on March 6th after having carried out a week-long mission in Cambodia to assess the impact of the crisis on the Kingdom. Although they might be alarmist, the many revisions made to economic growth predictions [see also ‘Spotted on the Web’ 24/02/2009] were until now rather weighted by recommendations emphasizing the assets of the small Asian state. This time, discussions became slightly heated and experts at the IMF confessed it straight out: they will not answer for any prediction from now on as there is increasing uncertainty as to the future of Cambodia’s economy. Facing the situation, the few recommendations issued by the IMF or the Asian Development Bank (ADB), who held a forum at the beginning of this week in Manila, seem, above all, to show the helplessness felt by many developing countries such as Cambodia.

Recession: a word and an evil that were still unknown yesterday

“Recession”. Who would have thought that only a few months ago, the word would appear in the Cambodian economic language, which focused until now on “growth”, “development” and “expansion”? The team of IMF experts came especially from Washington to visit Cambodia from February 25th through March 4th and took care of not using that particular scary term, but the conclusion they reached is no less explicit: according to the team’s projections, the Cambodian Gross Domestic Product (GDP) should fall by about 0.5% in 2009, compared with the previous year’s GDP.

Click to Read More...

Lasting recession could set in: IMF [-Add papaya and banana trees and Cambodia's GDP will increase: Trust Dr. Hun Xen on economy]

A farmer plants rice in a paddy field outside of Siem Reap. Agriculture was seen as the one sector that has showed better-than-expected promise, but the IMF warned that fallling prices could curtail growth in 2009. (Photo: BLOOMBERG)

Monday, 09 March 2009
Written by STEVE FINCH AND KAY KIMSONG
The Phnom Penh Post

-0.5%
the IMF’s growth forecast for Cambodia in 2009

The International Monetary Fund has revised its GDP growth forecast downwards for 2009 from 4.75 percent, made in December, to a contraction of 0.5 percent.

IMF recommendations

In its statement released on Friday, the International Monetary Fund made a number of recommendations to the government:

• Larger fiscal stimulus than previously planned should be enacted
• 4.75 percent of GDP should be level of budget deficit to allow for increased spending
• Pro-poor social outlays and safety nets should be the focus of spending
• High-quality infrastructure should receive funding to strengthen competitiveness
• Tax administration should be maintained at the same level to guarantee revenue base
• Enforcement of regulations in the banking sector to safeguard the system

Source: IMF

Forecast points to recession in 2009 and the possibility of economic uncertainty extending to 2010 depending on the state of the global economy, as world crisis bites deeper locally

IN predicting negative growth for 2009, the International Monetary Fund (IMF) said on Friday that adverse economic conditions would likely continue into next year, with Cambodia turning in a worse economic performance than it did during the Asian financial crisis more than a decade ago.

Having predicted 4.75 percent gross domestic product growth in December, the economy is now expected to contract half a percentage point, the IMF said in a statement following a mission to Phnom Penh that ended on Wednesday.

"Negative incoming data from all regions of the world, coupled with a further erosion in investor and consumer confidence and continued turmoil in global financial markets, point to an extremely challenging growth environment in 2009 and 2010," the statement said.

Cambodia has not experienced such low growth for more than a decade, even managing to maintain 1 percent GDP growth in 1997 and 1998 during the Asian economic meltdown, IMF data shows.

Previously, the lowest forecast for 2009 was 1 percent growth, made by the Economist Intelligence Unit last month, a prediction the ruling Cambodian People's Party rejected at the time. Prime Minister Hun Sen a week prior insisted that Cambodia could reach 6 percent GDP growth this year.

Government rejection

Ministry of Finance Secretary General Hang Chuon Naron refused to comment on the IMF's prediction on Sunday. However, Cheam Yeap, chairman of the National Assembly's Finance, Banking and Audit Commission, rejected the IMF forecast.

The Cambodian economy is very dependent on the world economy.

"As a Cambodian, I no longer trust what the IMF says," he told the Post Sunday. "They always exaggerate ... only trust what Samdech Hun Sen says.

"They [the IMF] don't know how to count correctly," he added. "Cambodian people know better, I think."

But Chan Sophal, president of the Cambodia Economic Association, said he thought the IMF's forecast was realistic based on the increasing evidence that the global crisis had reached the Kingdom.

"There is so much uncertainty ... the Cambodian economy is very dependent on the world economy, especially the US," he said, referring to the garment and tourism sectors in particular.

Citing Cambodia's exposure to the global economy, the IMF pointed to a decrease in garment orders from abroad - particularly from the United States and the European Union - a declining tourism sector, reduced Cambodian competitiveness following currency appreciation and a slowing construction sector as the main reasons behind the gloomy forecast.
Agriculture a positive

Agriculture was seen as a sector that had overperformed last year, but the IMF warned that falling prices "may limit further gains".

Commodity reports produced by the Ministry of Commerce show agricultural products have fallen in price this year. Grade-one milled rice has dropped 3.2 percent on the domestic market since January 1, figures showed on Thursday, while mung beans have dropped 5 percent and peanuts more than 25 percent over the same period. Meanwhile, paddy has increased 12 percent.

Agriculture has also been badly affected by border tensions with Thailand and a blockade on cassava and rice that hit traders on the border recently.

The IMF conceded on Friday that "a larger-than-usual degree of uncertainty exists around this [GDP growth] projection" given the global situation. The "highly uncertain" outlook for next year is "hinging critically on global and regional growth prospects", it added.

IMF: Cambodian economy set to contract sharply [-The IMF dares to contradict our good Dr. Hun Xen?]

PHNOM PENH, March 9 (Xinhua) -- The International Monetary Fund (IMF) has made its most gloomy economic outlook for Cambodia, or 4.25 percent of growth in 2009, English-language daily newspaper the Phnom Penh Post said on Monday.

IMF blamed Cambodia's increasing exposure to the global financial crisis and warned the contraction could be even worse.

The revision marked an obvious downturn from the body's December forecast of 4.75 percent for 2009.

The review followed the visit on Wednesday of an IMF mission from the organization's head office in the United States.

"Real GDP (gross domestic products) is now projected to fall by about (half a) percent in 2009. Given the rapidly evolving global situation, a larger-than-usual degree of uncertainty exists around this projection and risks remain titled to the down side. The outlook for 2010 is also highly uncertain," the paper quoted a statement of the mission as saying.

Meanwhile, the mission concluded that the economic environment would remain "extremely challenging" into next year.

Cambodian Prime Minister Hun Sen once vowed to maintain a 6 percent GDP growth rate in 2009, while the National Bank of Cambodia (NBC) predicted a 5 percent growth.

The World Bank was only confident of a 4.9 percent GDP growth rate for Cambodia in 2009, and the Asian Development Bank 4.7 percent, according to their press releases.

Official figures show that the GDP growth rates of the country respectively stood at 10.3 percent in 2004, 13.5 percent in 2005, 10.8 percent in 2006, 10.2 percent in 2007 and 7 percent in 2008.

Cambodian Economy To Contract 0.5% - IMF [-But, our Dr. Hun Xen said that Cambodia will not be impacted, was he wrong all along?]

Friday March 6th, 2009

PHNOM PENH (AFP)--Cambodia's economy will shrink by 0.5% this year, the International Monetary Fund said Friday, lowering its earlier prediction as the country is hit by the global financial crisis.

In a press statement the IMF said the poverty-stricken country wouldn't make the target set late last year of 4.8% growth in 2009.

"The global economic contraction and financial crisis are increasingly affecting Cambodia's economy," the statement said.

Cambodia has seen sharp declines in garment exports to the U.S. and Europe as well as fewer tourist visits, the financial institution said.

It added that there has been a rapid slowdown in construction and foreign investment as the country's economy is doused after enjoying several years of double-digit growth.

The statement recommended that the Cambodian government help stimulate growth by allowing its budget deficit to rise to around 4.75% of gross domestic product - a significant increase from its 2% deficit last year.

Despite recent growth, underemployment, where someone's work earns only a meager return, remains high in Cambodia, one of the world's poorest countries.

Some 35% of the country's 14 million people live on less than $0.50 a day.

Low garment sales, poor tourism to hit Cambodia-IMF

PHNOM PENH, March 6 (Reuters) - A slowdown in garment exports and a drop in the number of tourists could cause Cambodia's economy to shrink 0.5 percent this year, the International Monetary Fund said on Friday.

That is a big turnaround from the 4.8 percent growth the IMF had forecast in November.

"Garment exports are under pressure due to sharply lower retail demand in the United States and European Union," it said in a statement after an IMF team ended a mission to the Southeast Asian country. Garments are Cambodia's biggest export earner.

Construction activity and foreign investment were also slow as external investors cut back, the IMF said said.

The World Bank projected foreign direct investment of around $800 million in 2008 and has said it could fall "probably to below $600 million" in 2009.

(Reporting by Ek Madra; Editing by Alan Raybould)