Cambodia Investment Review

IMF predicts economic growth and stable inflation for Cambodia in 2021

IMF predicts economic growth and stable inflation for Cambodia in 2021

Harrison White

The International Monetary Fund (IMF) has predicted the Cambodian economy will grow 4.2% this year and 6% in 2022, following a 3.5% contraction in 2020. Inflation was predicted to remain relatively stable at 3.1%. 

The estimates were announced by the funds Senior Economist in Cambodia Yasuhisa Ojima at the first CEO Forum under the theme “Economic Outlook and COVID Recovery of Cambodia and the ASEAN Region.”

It was reported that Ojima outlined the financial sector looked stable mainly due to policy measures with easing financial conditions and allowing loan restructuring until the end of December 2021.

However, uncertainties remain especially for credits to the real estate and construction sector including from the shadow-banking system and tourism sector. As long as uncertainty remains high, policy restricting capital distributions would be warranted on grounds of prudence.

In April, the Asian Development Bank predicted the economy was expected to grow 4.0% in 2021 and 5.5% in 2022 due to “the economic recovery in major trading partners boosts demand for Cambodia’s exports”.

“The economy contracted by 3.1% in 2020 because of the global coronavirus disease (COVID-19) pandemic. The government has responded quickly to the recent spike in cases, and we expect the economy to return to growth in 2021. This will help increase household incomes, but not all sectors and regions will benefit equally, so it will be essential to closely monitor household welfare and the need for additional support,” said ADB Country Director for Cambodia Sunniya Durrani-Jamal.

“The uneven pace of the recovery across sectors will continue to put pressure on some households and firms this year, which will slow down the overall recovery. Key risks to the outlook include widening community outbreaks of COVID-19, slower than expected growth for Cambodia’s major trading partners such as the US and EU, continued weakness in domestic demand, and stress on financial services and banking,” she added.

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