Cambodia’s real growth is projected to remain healthy at 6.9 percent in 2016
PHNOM PENH, APRIL 11, 2016— Growth remains strong, estimated to have reached 7.0 percent in 2015, led by the garment and the construction sectors, according to the latest Cambodia Economic Update. In 2016, growth is expected to be around 6.9 percent, making Cambodia one of the fastest growing countries in East Asia.
There are downside risks to this outlook which may include continued appreciation of the US dollar, slower economic recovery in Europe, spillovers from a slowdown in the Chinese economy and potential labor market issues. Given the narrow production and export base and concentrated export markets in the European Union and US, the country is exposed to increased competition which gradually constrains growth.
"Scaling up public investments to address key infrastructure bottlenecks and further improving the business climate will be important for Cambodia to remain competitive,” said Alassane Sow, the World Bank's Country Manager for Cambodia.
Following a slowdown in early 2015, garment exports rebounded in the second half of the year, ending at a nominal year-on-year growth rate of 12.3 percent, compared with 9.2 percent in 2014. Construction remained a main engine of growth in 2015, driven by sustained foreign direct investment into the sector.
Growth in the tourism sector remained moderate despite a recovery in tourism activities in neighboring countries, particularly in Thailand and Vietnam. The total tourist arrivals in 2015 grew by 6.1 percent (reaching 4.78 million visitors), compared with 6.9 percent growth in 2014. Slow improvement in rice yields largely caused by less favorable weather conditions and depressed agriculture commodity prices constrained growth in the agriculture sector.
The Cambodia Economic Update highlights how the financial sector has supported economic growth in Cambodia over the past few years. Domestic credit accelerated by 27 percent year-on-year in 2015. In the current context, strengthening banking supervision would be advisable to safeguard financial stability and sustainability. Recent measures such as the increase in capital requirements for financial institutions are welcome developments.
