Cambodian economists reject recent GDP forecasts

Written by Kay Kimsong

Thursday, 09 April 2009 Phnom Penh Post

Opposition says reports on poverty and negative growth remain valid, critics say projections don’t reflect situation on the ground Photo by: TRACEY SHELTON Disputes have surfaced over the extent to which the financial crisis is projected to force additional Cambodians into poverty. CAMBODIAN economists and analysts on Tuesday dismissed predictions by international institutions that projected negative growth in Cambodia in 2009, such as Tuesday's World Bank report, while the opposition has agreed with such forecasts. The director general of the Cambodian Chamber of Commerce, Nguon Meng Tech, disagreed with the World Bank's forecast Tuesday that Cambodia faced negative growth this year, but called for the Ministry of Labour to quickly take action to create jobs or face the risk of increased social problems such as crime. The middle class would likely see income fall but would unlikely drop below the poverty line, he added. "In this era, no one faces starvation," he said. Sam Rainsy lawmaker Yim Sovann said he agreed with the World Bank, ADB and Economist Intelligence Unit (EIU) that the crisis would cause social problems. "Our economy is getting worse ... the government doesn't have any reasonable plan to help the economy," he said. The worst-case scenario was a rural poverty level of 85 percent, he said, with the four key pillars of the economy all at risk - many factories have closed, agricultural commodities have few markets, tourist numbers have decreased and the construction sector is struggling. Yim Sovann said that during years of double-digit growth, the government had only reduced poverty by 1 percent annually - a figure that equals the aims of the UN Millennium Development Goal on poverty reduction. "If GDP growth falls to -1 percent ... poverty could increase to 40 percent," he said. Chap Sotharith, senior fellow economist for the Cambodia Institute of Cooperation and Peace (CICP), said he disagreed with the projections released by international organisations on Cambodia's productivity. "For me, Cambodia's risk of a downturn would not mean negative growth," said Chap Sotharith, who said a forecast of 5-6 percent growth was more likely given Cambodia's dependence on agriculture. Export revenue made up just 20 percent of the economy, he added. "We are facing some problems but not a huge problem; there is no need to worry about a recession. Look, we had good rain earlier this year, so it is a sign that the agricultural yield will be huge," he said. People had been used to saving money for a long time, he said, adding that there was no clear definition of poverty in Cambodia. The World Bank on Tuesday defined the poverty line across the region as living on less than US$1.25 a day, which would result in 200,000 additional Cambodians falling below the mark this year, the most in Southeast Asia, it said. The Cambodian government in the past has set $0.60 a day as the poverty line, a figure that the World Bank has also previously used.