Cambodia’s ongoing economic boom seems to be getting ‘boomier’ and this year’s GDP growth rate is predicted to exceed 7% according to a a preliminary assessment released by the ASEAN+3 Macroeconomic Research Office (AMRO) last month.
Led by the country’s construction, garment and tourism industries, the economy is expected to grow at a rate of 7.2% in 2018, slightly higher than last year’s 7%, say the report’s authors. However, they say work remains to be done in order to ensure that growth continues in this vein.
“To maintain this strong growth momentum, the authorities need to strengthen their policy efforts to accelerate structural reforms, safeguard financial stability, and reprioritise fiscal resources towards growth-enhancing spending,” said AMRO lead specialist Dr. Seung Hyun Hong.
Dr. Hong also noted that higher government spending due to increased public investment and public sector wages will provide additional support to growth in 2018. Inflation rose to 3.1% this year, a slight increase on last year’s 2.9%, and a reflection of rising energy prices.
Among other indicators, the report highlighted Cambodia’s foreign reserve surplus, $8.8 billion in 2017, which is growing thanks to its increasing appeal to foreign direct investment, and the country’s broadly sound financial sector which is benefitting from improved standards and prudent regulation though work remains to be done here.
However, despite revenue growth, Cambodia’s budget deficit is project to widen further in 2018 thanks in part to a rapid increase in public sector wage bills. The authors also referenced the Kingdom’s expanding infrastructure gap, and the relatively low expenditure on health and education. They recommended that spending growth should be moderated by keeping an eye on the wage bill to ensure it remains sustainable, and strenghtening the implementation of the Public Finance Management Reform Programmes (PFMRP).
AMRO is the regional macroeconomic surveillance unit of the Chiang Mai Initiative Multilateralisation (CMIM) established to contribute to securing the economic and financial stability of the ASEAN+3 region, which includes the 10 members of the Association of Southeast Asian Nations (ASEAN) plus China, Hong Kong, Japan and Korea. AMRO fulfils its mandate by conducting macroeconomic surveillance, supporting the implementation of the regional financial arrangements and providing technical assistance to member states.