Cambodian Economic Minister Refused ADB’s Forecast Growth

By Soy Sophea

Cambodian senior economic officials refused the Asian Development Bank’s Economic Outlook 2009 prediction of an economic slowdown to 2.5 percent in 2009, as it appears too pessimistic.

The Asian Development Bank on March 30 announced its Economic Outlook which show that the Cambodia’s economic growth slowed down. The ADB also predicted that regional growth would slow to 3.4 percent in 2009 on lower exports.

Minister of Finance Keat Chhon dismissed the ADB and International Monetary Fund’s economic forecast that Cambodia’s economy will grow slower than expected. Chhon told reporters at the National Assembly that ADB and IMF’s prediction were based on few statistics.

“We hope that we will have higher economic growth because I am confident we have good policies at the moment. It does not mean that we are sitting on a basket and trying to lift ourselves,” he said. “We have prepared ourselves to prevent this crisis from seriously affecting our country, so I hope that our economic growth will be higher than what they have predicted.”

He said that ADB and IMF are pessimistic and that they have not considered Cambodia’s informal economy.

“In the U.S., 13.8 percent of the economy is informal, so Cambodia needs informal economics,” he said. “I will not make a prediction according to the 2009 national budget. The economic growth rate is 6.5 percent, according to the law, but now we can’t reach that level.”

ADB Country Director Arjun Goswami said the Cambodian government is doing well in the crisis. He said that there is an understanding of the crisis and what needs to be done, but this is a very difficult time for all organizations, including the Cambodian government.

ADB’s Economic Prospects

ADB said that inflation, which affects the poor and those with fixed wages, is forecast to decelerate to single-digit levels, but economic growth is set to decline sharply. It said the forecasts are made on the government’s ability to regain overall macroeconomic stability in the form of a return of inflation to sustained low single-digits.

ADB stated that growth is forecast to slow to 2.5 percent in 2009 for the three main reasons. First, government exports are expected to contract because of lower demand in the U.S. and Europe, high wage costs, the ending of safeguards imposed on the People’s Republic of China at end of 2008 and increasing competition from Vietnam. Orders for delivery in the first half of 2009 are sharply lower than at the same time last year, and the outlook is poor for overall retail sales in the U.S.

Second, ADB explained that the growth in tourist arrivals has already slowed significantly, reflecting the combination of recession in Europe and a continued decline in the number of tourists from the Republic of Korea – a critical target population in the tourism industry – partly owing to a much weaker Korean won against the US dollar.

The third reason, the ADB explained, is that the recent slowdown in construction growth from rapid rates is expected to continue and to return negative for the year as a whole, reflecting reduced Foreign Direct Investments from Korea, which is heavily invested in the sector, and the decline in poverty. Non-tourism services are also projected to grow much more slowly than in recent years, reflecting the overall downturn in economic activity and sentiment.
//////////////