The World Bank’s released its annual economic update on Cambodia at the end of November and said that Cambodia is unlikely to reach its projected targets of becoming an upper-middle-income country by 2030 and a high-income economy by 2050. At the reports launch, regional economists explained that sustaining the considerable growth the country has seen over the past two decades would be a challenge for Cambodia.
Norman Loayza, Lead economist for the World Bank explained that even if Cambodia does manage to maintain its consistent growth, the government’s short-term goal of becoming an upper-middle income country by 2030 is a “very tall order indeed.”
Loayza said: “If we consider default ‘business as usual’ assumptions, the GDP growth in Cambodia will continue at about 7% annually [over the next 22 years]. Will this be enough to meet the government’s targets? The answer is no.”
Loayza added: “We can look back at other countries in the region to see if they would have achieved these goals that Cambodia has set for itself. Only Asia’s most rapidly developing countries have come close to meeting the same targets. He cited China, South Korea and Malaysia as examples of rapidly developing countries that could serve as role models for Cambodia.
An analysis of the rate at which China, South Korea and Malaysia grew, concludes that only by matching China’s rapid growth would Cambodia be able to become an upper-middle-income country by 2030, and only by matching South Korea’s growth could Cambodia reach its high-income goal by 2050.
The World Bank analysis: “Only if Cambodia were to grow at the rate of China would this [2030 goal] be achievable. But this is almost impossible. When China’s GDP matched that of Cambodia’s current economy, Chinese rates of investment and savings were far higher than the Kingdom’s own.”
According to the World Bank, both Malaysia and South Korea offer more comparable and reasonable patterns of economic growth for Cambodia to follow. If Cambodia were to set its goal of becoming an upper-middle-income country back by five years to 2035, then it could in theory follow South Korea’s projected growth to meet both of its economic targets – if it were to increase its levels of investment and per capita savings at the same rapid rate.
The World Banks Loayza said: “If Cambodia were to follow this nice path, they would exceed the growth necessary to meet their 2050 target. Future government policies must focus on emphasizing market sustainability, addressing income inequality, and managing export orientation if growth in the Kingdom is going to be sustained.”
Bronwyn Grieve, the program leader for the World Bank Group said that to be realistic, Cambodia must prepare for future economic shocks that could derail or slow its growth. Preparing for the digital revolution will be especially important in order to ensure financial sector stability in a country that has relied for years on low-skill labor as a pillar of its economy.