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Economy Forecast to Grow by 1.9% in 2021

Phnom Penh: The Asian Development Bank has revised its growth forecast for the Cambodian economy. It says the economy will manage just 1.9% growth amid the prolonged pandemic, but does expect a rebound of 5.5% across 2022.

ADB Country Director for Cambodia, Sunniya Durrani-Jamal, says the “protracted pandemic has hurt services and domestic demand. Lockdowns and temporary factory closures hit production in the garments, travel goods and footwear sector earlier this year. Taking this into account, we now project Cambodia’s economic growth to be 1.9% in 2021, down from our April forecast of 4%.” According to the Asian Development Outlook Update (ADOU) 2021, the agriculture sector is expected to grow by 1.5%, but the overall impact from the pandemic has been limited. Agricultural exports rose 30.3% year-on-year in the first half of 2021, with solid growth of non-rice exports.

The ADB found that domestic demand for food, accommodation, transportation and other in-person services has been severely limited by the Covid-19 outbreak and lockdowns. Restrictions on international travel remain and international visitor arrivals were down by 91.3% year-on-year in the first half of 2021. Growth in services output is projected to contract by -0.6% by the end of the year.

According to the report, exports from the garments, travel goods and footwear sector were well below pre-pandemic levels in the first half of 2021, albeit higher than in 2020. Other manufacturing has continued to thrive and construction activity has begun to recover, with imports of construction materials rising by 23.5% year-on-year in the first six months of 2021. Growth in industry is now projected to hit 5.3%, subject to accelerating exports and persistent strength in other manufacturing.

The ADB declared that government’s steps to mitigate the pandemic’s economic and social impacts, including free vaccines and treatment, cash transfers to poor households, economic stimulus and loan restructuring programs had done their job:

“To increase people’s wellbeing and sustain growth the government will need to continue strengthening its social protection systems and improve the quality of healthcare and education. Steady reforms are also needed to attract investment for high quality infrastructure, including digital infrastructure. Enacting reforms to enhance the performance of the civil service, is also fundamental to improving the country’s international competitiveness.”

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