World Bank says Cambodian political uncertainty has 'unclear' impact

 

World Bank says Cambodian political uncertainty has 'unclear' impact

PHNOM PENH (The Cambodia Herald) -- The World Bank said Monday that the impact of Cambodia's political uncertainty was "unclear" but left its growth forecasts unchanged for this year and next year.

"The Cambodian economy remains robust amidst a challenging global economic environment," the bank said in its East Asia and Pacific Update.

"Prospects for meeting the growth projection of 7 percent in 2013 appear favorable.

"Overall macroeconomic outlook remains positive, having sustained agricultural growth with favorable weather conditions, continued strong performance of the tourism sector and a resilient garment sector.

"The economic outlook, however, faces some risks.

"It is unclear how big an impact the political uncertainty postelections is having on foreign direct investment (FDI) and growth, even with some improvements on the external front with initial signs of improvements in the US and European Union (EU) economies."

GARMENT INDUSTRY ADAPTS TO EXPORT MARKETS

The bank said the garment industry had adapted by focusing on lower-end garment products for the United States and higher-end products for Europe. In the first half of 2013, garment exports grew 18 percent from a year earlier.

Rice production had meanwhile continued its strong growth with increased cultivation accounting for up to 80 percent of the annual increase in output over the past four years.

At the same time, diversification had attracted tourists from Eastern Europe, East Asia and the Pacific with arrivals rising 19 percent from a year earlier in the first half.

POVERTY FALLS SHARPLY

"As a result of the rapid pace and pattern of growth that enables benefits to be shared by a larger number of people, Cambodian poverty has fallen sharply," the bank said.

"Economic growth broadened over the last years thanks in large part due to the sustained growth in the agricultural sector favored by increases in rice prices in the global markets."

The bank also noted that Cambodia's financial deepening was continuing with a growing number of banks entering the Cambodian market.

"Competition among banks has contributed to narrowing the US dollar interest rate spread, and driving some efficiency into the market," it said.

"However, there are also significant risks to having a large number of banks due to supervision capacity challenges."

The bank is also forecasting 7 percent growth for 2014, making Cambodia the fastest growing economy in Southeast Asia after Laos.

Cambodia's opposition National Rescue Party has been staging protests and boycotting parliament since losing elections to the ruling Cambodia's People's Party in July.

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