Cambodia’s international business community remain ‘bullish’ on the local economy despite the recent GDP growth downgrade citing an ultra-fast vaccination drive and multiple bilateral and multilateral trade agreements to be implemented next year.
Gross Domestic Product (GDP) growth is forecasted to be 2.5% this year, down from the previous projection of over 4%, according to the government news outlet AKP. The downgraded has been forecast as investors ‘wait and hold’ due to ongoing COVID border and business restriction causing uncertainty in Cambodia’s economy.
High levels of uncertainty are being reported in the real estate and construction sector including from the shadow-banking system and tourism sector, in turn impacting on policy decision such as restricting capital distributions.
Oknya Lim Heng, Vice President of Cambodia Chamber of Commerce told Cambodia Investment Review that he believes while 2021 will have stagnated growth, 2022 should provide a quick rebound. He said once the national vaccination drive is compete it will provide a good opportunity to attract to more investment into Cambodia.
“Cambodia should be able to vaccinate the majority of its population by the end of 2021 and may be one of the first countries in the region to finish their vaccination drive. In addition, by next year the government should have implemented the FTA with China and South Korea and have a GSP with America and England. RCEP is also another factor to help attract more investment into Cambodia,” he said.
Anthony Galliano, President of American Chamber of Commerce told Cambodia Investment Review that he believes the current forecast may be over cautious as there is much potential upside for Cambodia.
“With the obvious proviso, that the pandemic subsides, which is an unpredictable variable. What may be subjectively absent in the numbers is faith, the fact that Cambodia had an incredibly and consistent record of as one the fastest growing economies in the world, and such performance can be resurrected post-COVID,” Galliano said.
Galliano agreed with Heng that the Kingdom is well ahead of its’s neighbors with one of the best vaccination records in the world, and even potentially much more advanced, with plans of a third dose and vaccination of children.
“This [vaccination timeline] should allow Cambodia to welcome back business and investment faster, reduce quarantine substantially for the negatively tested and vaccinated. Thus allowing the expeditious completion of suspended projects and the earlier capacity to start new ones. Economic activity should accelerate with the potential for V shaped rebound and saving hospitality, which has dragged down the GDP,” Galliano added.
Andrew Tay, President of Singapore Club Cambodia told Cambodia Investment Review that he hopes the national GDP does not slide any further. Adding, this depends on Cambodia and the countries that it trades with. “They too must be vigilant in their fight against COVID, with that we can look forward to an economic recovery,” Tay said.
“I applaud the Cambodian government for going ahead with the 3rd jab and I hope most of the ASEAN nations will take up speed too. No one is safe until everyone is safe. With that people are confident, we are confident with our economy, other nations will be confident with Cambodia,” Tay added.
Last month UK-based Fitch Ratings credit rating agency also downgraded Cambodia’s economic outlook below the forecast 4% GDP growth for 2021 stating the county continues to struggle with the economic shock of the COVID-19 pandemic.
The credit rating agency revised its 2021 real GDP growth forecast for Cambodia to 2.5%, down from its previous forecast of 3.8 percent. Both forecasts are lower than the IMF and Asian Development Banks forecast of above 4% GDP growth throughout 2021 – which were generated prior to the ‘February 20’ COVID outbreak.
IMF and Asian Development Banks forecast a 6% and 5.5% rebound in 2022, inflation was predicted to remain relatively stable at 3.1% this year.
In 2020 Cambodia registered negative growth of -3.1%, the sharpest decline in Cambodia’s modern history. Prior to the pandemic Cambodia had undergone a significant transition, reaching lower middle-income status in 2015 and aspiring to attain upper middle-income status by 2030.
The growth has been driven by garment exports and tourism, Cambodia’s economy has sustained an average real growth rate of 7.7% between 1998 and 2019, making it one of the fastest-growing economies in the world.