Neak Samsen, poverty specialist at the World Bank, attends the 2011 East Asia & Pacific economic update yesterday in Phnom Penh. Photo by: Heng Chivoan
Tuesday, 22 March 2011 15:01Tom Brennan
THE World Bank yesterday made a major revision to its estimate of Cambodia’s gross domestic product growth for last year to 6.7 percent from the 4.9-percent figure offered just six months ago.
The institution also boosted its GDP outlook for the year ahead, taking it to 6.5 percent from 6 percent.
“Driven by exports, the Cambodian economy achieved a stronger than expected recovery in 2010,” the World Bank said in its East Asia and Pacific Economic Update report released yesterday.
The continued strength of those exports, partly a result of preferential tariffs from the European Union, should drive growth in 2011 as well, the report said.
In addition to a good harvest that helped to send agriculture growth up 5.3 percent last year, the World Bank attributed the good performance to quicker than anticipated rebounds in Cambodian garment and footwear exports.
Garment shipments jumped 24 percent in 2010 after the global economic crisis had pushed them 20 percent lower the year before. At the same time, footwear exports skyrocketed 60 percent last year.
“As a result, some 55,300 new jobs have been created by both industries in 2010,” the World Bank said, “recovering most of the jobs lost during the 2009 economic downturn.”
The 187-nation institution also pointed to tourism as a major economic driver during the period. The number of tourists visiting the Kingdom rose to 2.5 million, a 16-percent increase over 2009, while tourism receipts climbed 14 percent to $1.8 billion.
Strong growth in Asia overall was the main catalyst for the growth in tourism, as the region accounted for 72 percent of all visitors to Cambodia.
The Kingdom also “initiated some diversification of its production and export base,” the World Bank said, with milled rice exports almost tripling in 2010 and foreign registered investment capital rising 16 percent.
As for 2011, growth for Cambodia is expected to be strong for the coming year, according to the report. But the World Bank did say that exports “may be constrained by the profile of the global recovery”.
“Consumption would pick up as the recovery takes hold, while investment would benefit from a continued rebound in [foreign direct investment] and credit to the private sector,” the report said.
Inflation, meanwhile, remains on the radar of the World Bank, though it said consumer price inflation within Cambodia was at an estimated 3.1 percent in 2010.
Core inflation, excluding food and energy costs, fell from 4.5 percent in 2009 to just 1 percent last year, the World Bank said.
The estimate for CPI inflation in 2010 derived from Ministry of Commerce’s data was slightly higher at around 4 percent.
Cambodia has managed to sidestep the sharp rise in food prices seen across the rest of the globe thanks to a large supply of rice following the strong harvest season and what the World Bank called “moderate demand” from its neighbours, Vietnam and Thailand.
The only potential near-term inflationary threat might be imported inflation, said World Bank economist Huot Chea, given the amount of consumer goods brought into the country through Thailand and Vietnam. But while that is a concern, nothing has materialised yet to indicate the threat is imminent.
Huot Chea also said that the massive earthquake and tsunami that struck Japan would not negatively affect business in the Kingdom.
“Japan is not a [major] trading partner of Cambodia. So the disaster … would not have any impact on the Cambodian economy,” he said.
While Japan would suffer short-term economic damage from the disaster earlier this month, the bank said its impact on the broader region should be limited to a quarter or two.
“As reconstruction efforts get under way, there should be a pick-up in economic activity that would boost growth,” said Ivailo Izvorski, lead economist for the World Bank in East Asia.
Not everyone has agreed with the World Bank’s relatively sanguine outlook on Japan’s ability to recover.
Speaking at a forum in Singapore, the country's Finance Minister Tharman Shanmugaratnam said Japan's nuclear crisis could hurt both consumer and business confidence.
ADDITIONAL REPORTING BY REUTERS