PHNOM PENH, Dec. 16 (Xinhua) -- Cambodia’s GDP (Gross Domestic Product) growth this year would be over 6.4 percent although the country had suffered from the worst floods, destroying about10 percent of the agricultural crops, said Cambodian senior officials and economists.
Except agriculture sector, the other three economic supporting pillars—garment industry, tourism industry and real estate sector —remain strong growth.
“The 2011 growth is expected to be over 6.4 percent,” said the Deputy Prime Minister Keat Chhon, minister of economy and finance on Dec. 15.
The industrial sector is projected to grow at around 8.5 percent, compared with 13.6 percent in 2010, of which the garment industry will see growth of 11.2 percent, compared to 10.4 percent in 2010, he said.
Agriculture will see the growth of 3.6 percent, lowered than that of 4 percent in 2010 due to the floods; and service sector being as the same as that of 6.7 percent in 2010, said the minister.
This year, Cambodian ‘Riel’ value remains stable compared to the U.S. dollar and average annual inflation is maintained at around 5.5 percent, he said. In addition, the international reserves continue to rise to 3 billion U.S. dollars as of July, which is equivalent to four months of import.
“Cambodia has successfully gone through the most difficult period of the crisis like other countries in Asia while we also managed to maintain financial and macro-economic stability, social stability and creating favorable conditions for investment, trade and socio-economic development,” he said.
The country has suffered the worst flooding in the last decade since August. At least 250 people were killed and other 1.5 million people have affected.
The Minister of Commerce Cham Prasidh said at least 10 percent of the 2.4 million hectares of grown rice paddies this year had been completely destroyed by the floods.
However, he said the growth this year is still high if compared to other countries in the region.
A senior economist of the Asian Development Bank to Cambodia Peter Brimble said the ADB forecast that the country’s growth in 2011 is 6.8 percent thanks to sharp rises in garment exports, tourism and rice exports.
According to the government’s reports, in the first 9 months of this year, garment exports increased by 38 percent to 3.13 billion U.S. dollars, tourism industry rose by 15 percent to 2.08 million international visitors.
Also, the domestic and foreign investments in the country had increased by 305 percent to 5.67 billion U.S. dollars, while the investments in construction sector surged by 97 percent to 999 million U.S. dollars.
“It is clearly likely that the floods will affect the economic growth due to the impacts on livelihoods of the poor and the rice crop damage; however, since the flood damage is not yet clear, any estimates of the exact impact on economic growth are speculative at best,” he said.
He said the inflation this year is about 5.5 percent.
Whilst the International Monetary Fund (IMF) forecast on Dec. 8 that the country’s economic growth this year was 7.5 percent.
“Buoyant garments exports, increasing tourist arrivals, and a gradually-improving real estate sector have supported a broadening recovery,” the IMF’s Chief of Mission to Cambodia Olaf Unteroberdoerster said in a press briefing here. “Nonagriculture GDP growth in 2011 is forecast to exceed 7.5 percent.”
He said the inflation rate is expected to average 5.7 percent.
Dieter Billmeier, vice president of the kingdom’s third largest Canadia Bank, said that Cambodia's economy did well for the whole year of 2011 despite the recent problems of flooding in a number of provinces.
“All indicators are up, exports strong including garments, agriculture in general and milled rice in particular,” he told Xinhua in an interview. “For my forecast, the GDP is expected to grow between 6.5-7 percent this year, while inflation is still under control. ”
He said Cambodia is not like Thailand that a large industrial manufacturing sector affected by floods. Cambodia's infrastructure is generally intact; therefore, there is no any export problem.
However, the World Bank (WB) on Nov. 22 slashed Cambodia’s GDP growth to 6 percent this year, 0.8 percentage points lower than its previous forecast of 6.8 percent, due to the destructive flood impact and the expected slowdown of the EU and U.S. economies in the second half of 2011.
It forecast that the agricultural sector was previously expected to grow by nearly 4 percent, but is now projected to grow by a mere 1.5 percent for 2011 due to the recent floods, and the country’s consumer price inflation this year is expected around 7.5 percent due to soaring prices of commodities and oil.
GROWTH REMAINS STRONG IN 2012
Keat Chhon said the country is expected that, for 2012, the growth is projected to be 6.5 percent and inflation will be contained within 5 percent.
The IMF forecast the growth at 7.25 percent next year, assuming agriculture will return to pre-flood trends, said Olaf Unteroberdoerster, whilst the World Bank said the country's growth prospects for 2012 remain strong projected at 6.5 percent.
Dieter Billmeier warned that the country’s growth would slow down if there was a recession in some industrialized countries in the West, which would affect the garment and the tourism industry as a whole; however, the increasing need for food products globally would be an opportunity for Cambodia’s rice.
KEY CHALLENGES AHEAD
To keep robust growth, Peter Brimble said Cambodia has to diversify its economy, improve competitiveness including addressing governance issues, and improve connectivity with the Greater Mekong Sub-region.
Moreover, it has to expand the fiscal space, grow capital markets, and promote public-private partnerships.
He added that food exports to Asian markets such as China would reduce the heavy reliance on the United States and European clothing markets—hence the government’s efforts to promote rice production and milled rice exports.
The clothing and tourism industries face high costs for electricity and transport, and trade involves numerous bureaucratic procedures and unofficial fees.
“If these industries are to compete in global markets, they also have to raise the quality of their products and services and develop skills to support higher-value-added activities,” he said.
Dieter Billmeier said to ensure the sustainability of rice development, the country has to seek the investments of between 250- 300 million U.S. dollars in the next few years to modernize the rice industry and agricultural sector.
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