Cambodia Investment Review
Cambodia’s National Institute of Statistics (NIS) is set to revise the country’s Gross Domestic Product (GDP) estimates upward by around 30% in the coming months, from approximately $30 billion to $40 billion USD. This revision comes after a rigorous process that has been reviewed by the International Monetary Fund (IMF), aiming to provide a more accurate reflection of Cambodia’s economy.
The current GDP estimates are based on the year 2000 and do not consider the structural transformation, inflation impacts, and technological progress that the country has experienced over the past 23 years. The NIS has used 2014 as a new base year, which is still not completely up to date but more recent than the previous estimate, according to the locally-based financial consultancy firm Mekong Strategic Capital.
Impact on perception and investor confidence
The revision is expected to have a significant impact on perception and investor confidence, with Cambodia’s private debt to GDP ratio set to fall from around 180% to approximately 140%. Cambodia’s already low public debt will decrease further, and GDP per capita is expected to increase by around 30%, bringing the country closer to achieving high middle-income status. Moreover, the bigger economy is likely to be more attractive to investors than a smaller one.
On the other hand, there are some negative impacts that come with the revision. For instance, the increase in GDP means that Cambodia’s tax base as a percentage of GDP will decrease by around 30%, indicating that there is more work to do in growing the tax base.
Read more: International business community realizing Cambodia’s true investment potential
The revision exercise is recommended by international organizations such as the United Nations and IMF, which suggest that countries should perform the rebasing process every five years to provide policymakers with more accurate data. Many other countries have also undergone this process, with some experiencing more substantial revisions than others.
Over the past two decades, Cambodia’s economy has undergone a significant transformation. From a country ravaged by war and genocide in the late 20th century, Cambodia has emerged as one of the fastest-growing economies in Southeast Asia.
Over the past two decades, Cambodia has sustained an average annual GDP growth rate of 7.7%, with much of this growth driven by the garment and textile industry, as well as construction and tourism. This growth has lifted millions of Cambodians out of poverty, reduced the country’s dependence on foreign aid, and attracted increasing levels of foreign investment.
Cambodia – Asian Tiger of the 21st Century
Anthony Galliano AmCham President told Cambodia Investment Review that, “American Chamber of Commerce has promoted Cambodia as the “Asian Tiger of the 21st Century” and has touted evidence of the Kingdom’s amazing social and economic metrics over the last 2 decades as one of the fastest growing economies in the world. Cambodia is not a poor country and is a rising star in the ASEAN region as one of the most attractive investment destinations.”
“The numbers are compelling. Since year 2,000, GDP increased 27 times, GDP per capita increase 5 times, the Kingdom’s benefits from full employment with one of the lowest unemployment rates in the world and is a dollarized economy that substantially mitigates currency risk “Invest Cambodia”, the true hidden economic jewel in ASEAN, with exceptional growth and opportunities anticipated to accelerate through the decade,” he added.
Cambodia’s new GDP estimate is set to offer a more accurate reflection of the country’s economy, which is expected to lead to a boost in investor confidence and greater recognition for the progress that the country has made in recent years.
Read more: World Bank predicts Cambodia’s economic growth for 2022 and 2023
The World Bank is forecasting Cambodia’s economic growth is projected to accelerate to 5.2 percent 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.