Business and consumer confidence have risen and both domestic and foreign investment have increased, according to the World Bank’s Cambodia Economic Update for December 2022. Economic growth is projected to accelerate to 5.2 per cent in 2023 as increased hiring supports rising domestic consumption and as inflation recedes. However, prospects for faster growth face serious risks due to developments beyond Cambodia’s borders.
Cambodia’s economy is recovering well after COVID-19, but global headwinds could pose risks to a positive outlook in months to come, as per a World Bank report. Economic growth of 4.8 per cent in 2022 is projected as the post-pandemic economic recovery expands. Cambodia’s garment industry, travel goods, and footwear exports have been resilient.
Cambodia has a small economy that is open to outside trade and investment, and the global growth outlook is gloomy. Global trade growth slowed in the second half of 2022 and is projected to slow sharply in 2023. The economies of developing countries such as Cambodia are particularly vulnerable to rising inflation, slower global economic growth, decreased availability of energy supplies, and higher interest rates.
Cambodia’s manufacturing sector depends on export markets to thrive and would be negatively affected by an extended growth slowdown in its two largest export markets, the United States and the European Union. Similarly, investment and capital inflows would likely diminish as a result of a sustained slowdown in its largest source of foreign direct investment, China.
“To shield its economy from a possible drop in external demand, Cambodia could take steps to strengthen its fiscal position and promote its domestic economy, particular its globally attractive tourism industry,” said Mariam Sherman, World Bank country director for Myanmar, Cambodia, and Lao PDR.
Looking farther into the future, Cambodia’s economy is expected to advance to a growth rate of around 6 per cent.
Fibre2Fashion News Desk (NB)