Phnom Penh (FN), Sep. 22 – Cambodia’s economy is forecast to grow 1.9% in 2021 amid the prolonged coronavirus disease (COVID19) pandemic, but a rebound of 5.5% is expected in 2022, according to a new update from the Asian Development Bank (ADB).
“The protracted pandemic has hurt services and domestic demand,” said ADB Country Director for Cambodia Ms. Sunniya Durrani-Jamal. “Lockdowns and temporary factory closures hit production in the garments, travel goods, and footwear sector earlier this year. Taking this into account, we now project Cambodia’s economic growth to be 1.9% in 2021, down from our April forecast of 4.0%.”
According to the Asian Development Outlook Update (ADOU) 2021, the agriculture sector is expected to grow by 1.5%. Local coronavirus outbreaks had disrupted agricultural supply chains, but the overall impact was limited. Agricultural exports rose 30.3% year on year in the first half of 2021, with solid growth of non-rice exports.
Domestic demand for food, accommodation, transportation, and other in-person services has been severely limited by the COVID19 outbreak and lockdowns. Restrictions on international travel remain, and international visitor arrivals were down by 91.3% year on year in the first half of 2021. Growth in services output is projected at -0.6% in 2021.
The exports of garments, travel goods, and footwear sector (GTF) were well below pre-pandemic levels in the first half of 2021, albeit higher than in 2020. Other manufacturing has continued to thrive, and construction activity has begun to recover, with imports of construction materials rising by 23.5% year on year in the first six months of 2021. Growth in industry is now projected at 5.3% in 2021, subject to accelerating GTF exports and persistent strength in other manufacturing.
The government has taken steps to mitigate the pandemic’s economic and social impacts. Those measures included free COVID19 vaccines and treatment, cash transfers to poor households, economic stimulus, and loan restructuring programs.
“To increase people’s wellbeing and sustain growth the government will need to continue strengthening its social protection systems and improve the quality of healthcare and education. Steady reforms are also needed to attract investment for high quality infrastructure, including digital infrastructure. Enacting reforms to enhance the performance of the civil service, is also fundamental to improving the country’s international competitiveness,” said Ms. Durrani-Jamal.
Currently, ADB is implementing investment projects worth $2.08 billion in Cambodia. In 2020, ADB provided $477.2 million in sovereign loans and grants to Cambodia and catalyzed an additional $281.3 million through co-financing. ADB’s lending pipeline for 2021—2024 includes $1.49 billion in concessional lending and $31.8 million in grants to support the country’s economic development and recovery from the COVID19 pandemic.
ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region.