EIU forecasts 1pc growth

BLOOMBERG
A container ship is docked on the Tonle Sap River in Phnom Penh. Forecasters all say that Cambodia’s GDP growth will drop in 2009, with the EIU posting the lowest rate at just one

The Phnom Penh Post

Written by Post Staff
Thursday, 19 February 2009

Economist Intelligence Unit posts lowest 2009 growth prediction yet, saying the Kingdom’s economy is likely to feel long-term effects global downturn

CAMBODIA'S GDP will grow a minuscule one percent in 2009, its slowest pace in more than a decade, according to new Economist Intelligence Unit (EIU) figures.

In the most pessimistic assessment of the Cambodian economy yet, EIU - a part of the Economist Group which includes The Economist magazine - said that the economic crisis will hit all of Cambodia's major growth sectors and impede GDP growth for the next decade.

That would put Cambodia behind even Thailand, which is expected to grow about 3.8 percent in 2009, according to the Bank of Thailand.

"Demand for Cambodia's exports, especially garments, will be hit by the downturn. Tourism, a major source of growth in recent years, will suffer too as consumers elsewhere in the world cut back on travel and holidays," said the statement.

The EIU, which hosted the Business Roundtable in Siem Reap this week, also predicted slower construction and real estate with "tightening credit conditions and the pull-back of foreign investors".

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The crisis could have lasting consequences for the country's growth.
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"The crisis could have lasting consequences for the country's growth," according Justin Wood a director of EIU's Corporate Network. "The next 10 years will be more challenging for Cambodia than the past decade, and economic growth is unlikely to be as strong."

Government disagrees

EIU's low forecast contrasts with that of Prime Minister Hun Sen, who on Monday gave a much more optimistic assessment of the economy, predicting six percent growth in 2009, and saying growth had hit seven percent in 2008.

"Indeed, growth is expected to slow down in 2009 due to the unfavourable conditions within the context of the current financial crisis and global economic downturn," Hun Sen said in a speech at the Business Roundtable in Siem Reap..

The premier said Cambodia had achieved an average 9.4 percent annual growth over the past decade, hitting 10.8 percent in 2006 and 10.2 percent in 2007. He said Cambodia had also accumulated up to US$2 billion in international currency reserves by 2008.

A senior Cambodian People's Party official reacted angrily to the Economist Group report on Wednesday, saying it could damage Cambodia's reputation. "Hun Sen's prediction of six percent growth is correct because we have not been impacted as badly [by the crisis] as other countries. Our four leading sectors have still not been seriously impacted," said CPP lawmaker Cheam Yeap. "I do not agree that growth will be only one percent. We hope it will reach at least six or 6.5 percent."

He criticised the Word Bank and other international financial institutions for incorrectly predicting slow growth in 2005 when Cambodia grew 13.4 percent.

"I know they like to attack us on corruption, lack of transparency or weak tax collection, but in reality, we have achieved good results," he said.

Opposition lawmaker Yim Sovann of the Sam Rainsy Party said growth would reach four percent in 2009. "The four leading sectors are now falling. Tourism declined, many factories have closed, commodity prices have decreased and construction has crashed. How could growth hit six percent?" he said.

The World Bank predicted 4.9 percent growth in 2009, the Asian Development Bank 4.7 percent and the International Monetary Fund 4.8 percent, but the IMF says that its figure will be revised downwards.