The National Bank of Cambodia (NBC) has forecast robust economic growth in 2019 and projects the Kingdom’s economy will grow at a rate of 7%, just marginally lower than last year, when growth reached 7.3%. The report also projects that the inflation rate will remain at 2.6%, while foreign reserves are expected to reach $11.3 billion USD.
According to the NBC, while it is extremely optimistic, it notes that growth could be weakened by a number of internal and external factors, including the potential cancellation of the Everything-but-arms (EBA) scheme with the European Union and the implementation of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
The report also mentions another external factor being the possibility of new free trade agreements between ASEAN countries that compete directly with Cambodia, and the EU or United States, which would also limit the Kingdom’s economic expansion.
As for internal risks, one of the biggest worries is an overreliance on the construction sector for growth, which is also burdened by high credit growth. By the end of 2019, credit in the construction sector is expected to grow at 31%.
Additional internal factors that can affect growth include high production costs, small economies of scale, limited access to power, the high cost of electricity and increases to minimum wages in the garment sector every year.
The NBC said: “To face these threats, the Central Bank will work alongside the government to reform and diversify the economy, provide a favorable investment environment, and develop the economic sector efficiently.”
It also noted, “The NBC will work to strengthen trust and develop the banking system efficiently while stabilizing prices in line with our development strategy for the financial sector for the years 2016 ~ 2025.”
Aun Pornmoniroth, Cambodia’s Minister of Economy and Finance, told the local Khmer Times news that trade has been instrumental in achieving a 7.3% economic growth rate in 2018. He said Cambodia now exports to 147 countries, with international shipments representing more than 60 percent of the country’s gross domestic product (GDP). At the same time, Cambodia now buys from 135 countries, with exports last year valued at $13 billion USD.
Minister Pornmoniroth said: “We hope to see more cooperation among key actors, including ministries, officials at all levels, and the private sector to enable the fourth phase of the government’s Rectangular Strategy to be a success in the sixth mandate, and to have a very productive 2019.”
In Channy, President of Acleda Bank, one of the largest commercial banks in the Kingdom echoed the NBC’s optimism and said that he expects 2019 to be a great year for Cambodia’s financial sector.
Channy said: “We still have the three most important factors: economic, social and political stability, which are fundamental for growth in the financial sector. 2019 will be one of the best years for Acleda Bank since, according to government and World Bank projections, the economy will continue to grow at a very fast pace.”