Cambodia
Date: 11 May 2012
The event will be held in Phnom Penh , Cambodia , with the participation of distinguished participants from academia, government, civil society, international organizations, and the press. The list of well known participants making opening remarks, presentations and commenting on the publication includes:
H.E. Mr. Hang Chuon Naron
Secretary of State
Ministry of Economy and Finance
Economic Affairs Officer
Macroeconomic Policy and Development Division
United Nations Economic and Social Commission for Asia and the Pacific
Country briefing note <download pdf file>
Economic growth helped by broader recovery despite severe floods
• Cambodia 's economy grew 6.9% in 2011, up from 6% in 2010, despite the worst floods in a decade damaging roads, irrigation and nearly one-tenth of rice crops.
• The recovery which began to gain hold in 2010 became more broad-based in 2011, with garments, tourism, construction and agriculture all contributing to growth.
• Garments, which account for two-thirds of manufacturing and 80% of export revenue, benefited from expanded quotas in European markets. Garment exports to the United States and the European Union reached $2.7 billion and $1.6 billion respectively.
• Tourist arrivals increased by nearly 15%. The industry itself grew by 5%, given that most of the increase in arrivals was from developing Asian countries.
• Construction and real estate sectors, which collapsed during the global financial crisis, began a gradual recovery as credit to the private sector picked up and foreign investment increased.
• Agriculture output grew by 3.3% and rice exports surged as the government promoted paddy production as part of its efforts to diversify the economy.
• In 2012, Cambodia is expected to grow slightly slower at 6.7%, given its heavy reliance on United States and European markets, although garment exports will only be marginally affected compared to goods like electronics. Meanwhile, tourism and agriculture will continue to grow strong.
Inflation driven by high and volatile food and oil prices
• Inflation picked up to 5.5% in 2011, from 4% in 2010 and a slight deflation in 2009 when the economy contracted.
• With food accounting for a large portion of the consumption basket, Cambodia saw inflation rise by nearly four percentage points during the first half of the year, from 3.3% in January to 7.1% in June.
• After subsiding in the third quarter, price pressures re-emerged in the fourth quarter as floods damaged agricultural crops.
Fiscal health slowly improving and social programmes expanding
• Fiscal deficit is falling from previous years of strong counter-cyclical spending. Property tax was introduced and contributed marginally to revenues. The Government is targeting for higher revenues and lower fiscal deficit in 2012.
• External public debt was at 28% of GDP at end-2010, and Cambodia was upgraded to a “medium performer” in the IMF/World Bank debt sustainability analysis.
• The Government is stepping up efforts on social protection, with focus on free healthcare for the poor, conditional cash transfers and labour-intensive public works.
Financial stability and monetary policy effectiveness becoming more important
• Credit growth to the private sector improved through 2011, while the number of banks continued to increase.
• The Cambodian stock market began trading in April 2012. Financial regulation and supervision needs to be strengthened, as exposure to volatile capital flows may increase.
• High dollarization continues to hamper the effectiveness of monetary policy.
Current account deficit a concern, but foreign direct investment increasing
• Current account deficit remains highest in the subregion, only after Lao People's Democratic Republic. This is due to heavy reliance on import of machinery and equipment for economic development, as well as a narrow, albeit expanding, export base.
• Growth of foreign direct investment inflows accelerated to 11% in 2011, from 5.4% in 2010. FDI continues to play an important role in strengthening the infrastructure and enhancing competitiveness.
Agriculture and rural development an opportunity to reverse income inequalities
• High economic growth in the past decade has led to rising incomes but also to rising income inequalities. Income share held by the top 10% of the population was over 37%.
• Income inequalities and urban-rural gaps have resulted in slower reduction of income poverty. Poverty level was at 30% in 2007.
• The renewed focus on agriculture and rural development is therefore welcome and could be an opportunity to make growth more inclusive.
• Increasing the number of productive, quality jobs is also a major task ahead. Addressing skills shortages and supporting micro, small and medium-sized enterprises, including through financial access and trade facilitation, will be important.
• Another key challenge lies in infrastructure development. Cambodia may be able to benefit in the future from the ASEAN Infrastructure Fund, which is expected to help leverage additional financing for infrastructure projects and enhance connectivity with other ASEAN members.
Policy brief: Living with high commodity prices <download pdf file>