The government projects a slowdown in economic growth next year, going from a growth rate of 7.1 percent in 2019 to 6.5 percent in 2020.
The slowdown will be the result of external pressures, led by the possible revocation of the Everything-but-arms (EBA) deal with the European Union and the US-China trade war, a Cambodian high-ranking official said, adding that the situation can be ameliorated if proper reforms are enacted.
The new economic projection was presented last week during a parliamentary workshop at the National Assembly to prepare the drafting of the National Budget Law for 2020.
Speaking at the workshop, Vongsey Visoth, secretary of state at the Ministry of Economy and Finance, said that to successfully face “external issues” Cambodia must undergo deep reforms to become more competitive and attract more investors.
“In 2020, economic growth will decelerate to 6.5 percent. This is still a healthy level of growth,” Mr Visoth said. “To achieve this growth, however, we need to ensure our economic reforms are implemented efficiently.”
Even if the EBA is withdrawn, Cambodia would still be able to achieve a “healthy” economic growth if all government institutions work together to efficiently enact reforms that strengthen the business climate, he said.
“The EBA may or may not be revoked. Whatever happens, it should not worry us if we can make the right reforms,” Mr Visoth said.
“If the EBA is withdrawn, we must undergo deep reforms. Ultimately, the revocation will be better for us in the long run as it will force us to make our economy stronger. If the EBA is withdrawn and we do nothing, we cannot say what will happen.”
Mr Visoth said the government should focus on reducing the impact of external pressures by increasing jobs, solving structural issues that limit competitiveness and market diversification, improving the financial management of public and private institutions, and enhancing the capacity of public institutions.
“If we implement these reforms efficiently, we will achieve 6.5 percent growth next year,” Mr Visoth said. “If we get sick and do not get treatment, it is dangerous. We wouldn’t just want to solve the issue short term. We would want to solve the issue completely so that we don’t have to worry about it in the future.”
The Asian Development Bank in April forecast that GDP in 2020 will grow at 6.8 percent following a slowdown in the economic growth of Cambodia’s main trade partners.
ADB country director Sunniya Durrani-Jamal said that while Cambodia will enjoy robust economic growth, it faces a series of internal and external challenges.
“Cambodia is projected to exhibit strong economic growth over the next two years, despite a weakening external environment,” Ms Durrani-Jamal said.
Regarding the EBA issue she said, “It is still too early to tell, but in the short term, it will drag export growth because garments are a major component of exports. But, let’s wait to see what happens.”
In 2018, the country’s economy grew at 7.5 percent.