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Business Research Institute for Cambodia CEO and chief economist Hiroshi Suzuki told <i>The Phnom Post</i> that the trade war between the US and China would only have a limited negative impact on the Cambodian economy. (Pic courtesy from The Phnom Post)

THE International Monetary Fund (IMF) has projected Cambodia's economic growth to be highest in the Asean region despite facing several challenges.

In its latest Regional Economy Outlook published on Tuesday, the IMF predicted that Cambodia’s economic growth would remain strong at seven per cent this year before easing to 6.8 per cent next year.

Vietnam is predicted to grow 6.5 per cent this year and next year, dropping from 7.1 per cent last year.

Business Research Institute for Cambodia CEO and chief economist Hiroshi Suzuki told The Phnom Post that the trade war between the US and China would only have a limited negative impact on the Cambodian economy.

“The conflict now makes Cambodia a very important candidate for many Chinese companies looking to shift their factories away from China.”

The IMF report showed that Indonesia, Asean’s largest economy, is projected to grow by five per cent this year and 5.1 per cent next year, while Thailand is expected to grow by only 2.9 and three per cent.

Malaysia is projected to grow by 4.5 and 4.4 per cent this year and next year, Myanmar 6.2 and 6.3 per cent, Laos 6.4 and 6.5 per cent and the Philippines 5.7 and 6.2 per cent.

Brunei is projected to grow 1.8 per cent this year and 4.7 per cent next year.

Meanwhile, Singapore’s growth is set to slow the most out of the Asean economies, to 0.5 per cent this year and just one per cent next year, from 3.1 per cent last year.

Suzuki said the EU’s Everything But Arms agreement was very important for the Cambodian economy, and without it, the country would struggle with regional competition.

“The garment industry in Cambodia cannot beat the trade competition in the EU. There are many strong competitors such as Vietnam and Myanmar,” he said.

According to the outlook, growth in Asia is expected to moderate to five per cent this year and 5.1 per cent next year – 0.4 and 0.3 percentage points lower than IMF’s April projection.

IMF senior economist Jarkko Turunen had said last week that the Cambodian government was proactively addressing economic risks and uncertainties through a structural reform plan aimed at improving competitiveness and diversification.

He had said that a government project was currently in the works to address spending on job creation, human capital development and infrastructure spending.

The World Bank’s East Asia and Pacific Economic Update report released earlier this month had said Cambodia’s economic outlook is facing several challenges, including the increase of credit provided to the construction and real estate sectors alongside rising indebtedness.

Suzuki said the booming real estate and construction sectors were the engines of the nation’s economy.

“If investment from China is affected by the slowdown of the Chinese economy, this boom could be finished,” he said, adding that the impact could devastate the Cambodian economy.

“The government and the National Bank of Cambodia would have to take the necessary measures to mitigate the negative effect when the real estate bubble has burst.”

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