High vaccination rates in Cambodia underline potential for strong economic rebound in 2022: ADB

Asian Development Bank has forecast 5.5% growth in 2022 after downgrading this year’s forecast to 1.9% – down from 4.0% in its April outlook. Inflation was forecast to remain relatively stable this year at 2.9%.

The downgrade was due to the COVID 19 delta outbreak slowing the recovery of domestic demand and restrictions on international travel. In addition, lockdowns and temporary factory closures continued to hit production in the garments, travel goods, and footwear (GTF) sector.

The development bank which is modeled closely on the World Bank, and has a similar weighted voting system where votes are distributed in proportion with members’ capital subscriptions highlighted the outlook was of course highly speculative.

Adding, the forecast was dependent on the continuing trend of COVID 19 restrictions on business being relaxed next year in line with health guidelines.

A resurgence in the COVID-19 pandemic—possibly due to new virus variants, waning effectiveness of vaccines or slow progress on vaccination—was listed as a main risk.

Overall growth forecasts for developing Asia were slightly revised down to 7.1% in 2021 from 7.3% in April, and up to 5.4% in 2022 from 5.3%.

David Freedman ADB Country Economist for Cambodia said the Kingdom was well placed with its ultrahigh rates of vaccinations however referred to a recent survey that found this was not translating into improving the general public’s fear of the virus.

“The COVID 19 virus is moving from a pandemic to an endemic and hence will require a change in thinking from consumers, business and policy makers,” Freedman said.

“Effective government communication will be key to increasing consumer confidence as well as reassuring investors that Cambodia was ready for investment,” he added.

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.

Oknya Lim Heng, Vice President of Cambodia Chamber of Commerce previously 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 completed it will provide a good opportunity to attract to more investment into Cambodia.

In addition, the updated Law on Investment should be fully approved in 2022 which aims to increase capital inflow and encourage economic diversification of the local economy.

Sunniya Durrani-Jamal ADB Country Director for Cambodia said overall: “The Government of Cambodia has continued to make commendable efforts to mitigate the pandemic’s impact, especially on the poor and vulnerable such as the provision of free COVID-19 treatment, social assistance, economic stimulus and loan restructuring programs.”

“In the longer terms, the government will need to further strengthen its social protection system and increase public investment and spending in the education and skill training, health, agriculture, and rural infrastructures including rural roads, water and sanitations, and electricity; and undertake further reforms and programs to improve the country’s international competitiveness and diversify its economy and export markets to create more job opportunities for rural populations,” she added.   

Currently, ADB is implementing $2.08 billion of investment projects in Cambodia. In 2020, ADB committed $477.2 million in sovereign loans and grants, and catalyzed an additional $281.3 million through cofinancing for Cambodia.

ADB’s lending pipeline for 2021—2024 includes $1.49 billion of concessional lending and $31.8 million in grants to support the country’s economic development and recovery from the COVID-19 pandemic.

Prior to the pandemic Cambodia’s economy had sustained an average real growth rate of 7.7% between 1998 and 2019, making it one of the fastest-growing economies in the world.

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