Positive trends in the first six months of this year will drive Cambodia’s economic growth in 2011 to 6.8%, up from the 6.5% Asian Development Bank forecast made in April. The Asian Development Outlook 2011 Update (ADO Update), released today, says the revision is mainly driven by a surge in garment exports in the first half of 2011.
The value of Cambodia’s garment exports to the United States in the first six months of this year compared to the same period last year increased by over 23%. Meanwhile, tourism arrivals increased by more than 13% and rice exports are on an upward trend.
“Cambodia will maintain solid economic growth for 2011 given the faster than expected recovery of garment exports and tourism as well as the positive outlook for the expansion of agricultural products. However, the current slowdown in global trade is likely to temper growth momentum in 2012,” said ADB Senior Country Economist Peter Brimble.
The ADO Update forecasts growth of 6.5% in 2012, down from a 6.8% projection made when ADB launched the annual economic flagship Asian Development Outlook 2011, reflecting the current frailty in global markets which could depress demand for Cambodian products in the second half of 2011 and into 2012.
Nevertheless, the report says, the declining trend in global markets is not expected to outweigh the positive growth already perceived. However, long standing challenges remain for Cambodia’s narrowly based economy – accelerating economic diversification, expanding the fiscal space, addressing governance issues, and strengthening the investment climate.
“Cambodia needs to address the long standing challenges to achieve sustainable growth,” stressed Mr. Brimble. “Reducing the high cost of transport, energy and diversifying agricultural products and the tourism sector are critical and will be addressed under ADB’s Country Partnership Strategy 2011-2013.”
Inflation is expected to average 5.5% in 2011 and 2012, unchanged from the ADO 2011 projection, thanks to the drop in global oil prices and assuming that they remain relatively constant for the rest of the year.
The report estimates the current account deficit at 11.6% and 11.0% of GDP, respectively in 2011 and 2012 due to the declining trade deficit.
The ADO Updated shows that in South East Asia, Cambodia ranks number 2 follow Laos with 8.1%, Indonesia 6.6%; Vietnam 5.8%; Singapore 5.5%; Myanma 5.3%; Malaysia 4.8%; Philippines 4.7%; Thailand 4%, and Brunei 1.7%.
The prediction is lower than the government prediction make by Cambodia Prime Minister on Monday that Cambodian expects to grow around 8.7%.