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Cambodia’s economy to grow by 7 per cent

Cambodia’s economy is expected to grow by 7.1 per cent this year. Growth would be driven by garment and footwear exports, construction and real estate, tourism and a moderate recovery in agricultural production.

Growth in industry is projected at a slightly higher than 10.8 per cent this year, supported by higher growth in major industrial countries and some diversification into products with higher value added such as garments, footwear, light manufacturing and electronics.

The service sector is forecast to expand by 6.7 per cent, driven by buoyant domestic demand and tourism, while agriculture is expected to grow by 1.8 per cent, assuming favorable weather. While the short-term economic growth outlook for the Cambodian economy remains strong, labor costs and skills shortages are increasing.

There is a need to lower the cost of doing business and improve productivity growth and competitiveness. Domestic risks stem from vulnerabilities in the financial sector, partly traceable to its rapid expansion, in particular the proliferation of microfinance institutions.

On the external front risks are: weaker growth in the euro area, a sharper-than-expected global tightening of credit, and a surge in the dollar, which could constrain exports and stiffen competition from other low-cost producers.