The Central Bank has predicted that the Kingdom’s real economic growth will be maintained at an average 7 percent with the inflation rate of 2.3 percent in 2020, according to the National Bank of Cambodia’s (NBC) Macroeconomic and Banking sector update 2019 and outlook for 2020.
The NBC says that the forecast for the economic growth is based on the projection of the recovery of the global economy which will contribute to a favourable climate for exports, foreign direct investments, and the tourism sector while Cambodia’s economy can also take a lot of advantages on its diversified-based growth and comprehensive reform to support sustainable development.
“Exports are expected to grow high, especially the exports of travelling bags and other manufacturing products. Although, the exports of garments will slow down,” NBC’s report said.
“Although the EU may decide to withdraw the EBA [Everything but Arms trade deal] from Cambodia in February 2020, the exports of the garments from Cambodia is expected to grow because the full withdrawal EBA process will become effective and implemented six months after the decision is made,” the report added.
It said that Cambodia will still export to the EU but the EBA preferential status may be removed. The NBC added that the loss of the EBA will just increase the value of Cambodia’s export products to the European Markets because of tariffs of around 0.1 percent to 12.5 percent according to the types of products.
“If there are still demansd from the EU markets on the Cambodian products, the exports from Cambodia to the EU will remain robust especially after the Brexit of England from the EU because Cambodia’s exports to England are around 20 percent of the total exports to the EU,” the NBC pointed out.
Ken Loo, the secretary-general of the Garment Manufacturers Association in Cambodia (GMAC), says that the garments exports for the first nine months of 2019 grew 12 percent. This was on the back of strong growth in the US market while exports to the EU were almost flat.
“The performance of our sector going into 2020 will depend very much on the outcome of the decision of the EU with regards to [the] EBA. If [the] EBA is retained, our sector should be able to continue to experience growth,” Ken adds.
“We should continue to see a revival in the exports to the USA. Our exports should continue to experience decent growth there,” he says.
Ken adds that every year garment industries continue to have a new foreign direct investment (FDI) coming to Cambodia. “We expect to see more investors in both garment and travel goods next year,” he notes.
“We will continue to focus on improving productivity and efficiency in our industry. We must continue to invest more in training and skills-upgrading for our workers. We urge all stakeholders to work together to ensure that our sector continues to thrive even when facing difficulties and increasing challenges,” Ken said.
The NBC report said that the increase of the minimum wage, however, has yet to affect the Kingdom’s competitiveness because the rate is increasing step by step while the productivity is also increasing.
The Government has also introduced some measures to reduce the production cost, launch the SME Bank (small and medium enterprise bank) and facilitate doing business in Cambodia, aiming at creating a better business environment in the country to support investments, pushing domestic production and promoting diversification of the export market.
“Cambodia’s economic growth will be supported by the inflow of FDIs, the growth of construction and the tourism sector,” NBC added.
According to Mey Kalyan, senior adviser of the Supreme National Economic Council in Cambodia, the country has to build a comprehensive and strong economy and globalise it and not rely solely on the rest of the world.
“We should diversify our products and boost local products to protect against risk and provide added-value to all stakeholders. We have to do more.” Mey. If we put in much effort, we will proceed fast. If not, we will move more slowly,” said Mey. “We have the basics and we know the issues, so our GDP will remain around 7 percent or slightly lower than 7 percent if the EBA remains as it is.
“But some issues are beyond the economy, so we cannot anticipate them. The EBA situation is not good news for society. Cambodia needs to push the country’s economic resilience.” Mey added. “From 2020, we have to tighten our belts. It’s not business as usual for both the administration and the private sector. We should try to build the country,” Mey concludes.
What Cambodia has to do in the longer term is to develop human resources and technology, improve the investment climate, modernise agriculture and protect the environment, he says. Developing science and technology are also important.
“We have to start with human resources, technology, and infrastructure. We have to improve even better. If we are lacking infrastructure. We have to find a way to build infrastructure and develop energy sources. We have to develop our human resources to accelerate more because our goal is to build peace.