In 2017, it was projected that Cambodia’s GDP would reach a record $23 billion by 2020. The country streaked past that projection in 2018, exceeding $24.5 billion before settling down to a GDP of $24 billion last year. In the seeming alternate universe that existed before the beginning of this year, the projection for Cambodia’s performance in 2020 had been raised by a whopping $3 billion, almost as much as the kingdom’s entire GDP just 20 years ago. But all of that, of course, has come screeching to a halt.
Novel coronavirus 2019 (COVID-19) has changed the world permanently. At home, while the number of confirmed cases remains low for now, the disruption to public life has been high. And for those dependent upon tourism and export manufacturing in particular, the effects have been a disaster.
Last month, the Asian Development Bank (ADB) issued a report on the outlook for Asia’s economic growth, with a particular look at the impact of COVID-19. As expected, it makes for grim reading, though it is not without hope.
The report forecasts a Pan-Asian GDP growth reduction from 5.2% last year to 2.2% this year. It adds that growth should jump back to 6.2% in 2021, provided that the pandemic ends this year and activity promptly normalises. The outlook for recently industralised countries including Cambodia is slightly better, with a drop in growth from 5.7% to 2.4% before rebounding to 6/7% in 2021. At this stage though, nobody can be really sure about the likelihood of that happening.
Cambodia in particular is predicted to see a sharp deceleration of its growth rates, which makes sense: the higher you fly, the harder you fall. Last year, the country posted GDP growth of 7.5%, the highest in ASEAN, South Asia and East Asia, and beaten only by the Cook Islands and Bangladesh across the rest of Asia. This year, that figure is expected to fall at around 2.3%, the average for the entire region. In 2021, Cambodia’s GDP, based on the optimistic outlook above, is projected to reach 5.7%, putting it firmly in the middle of the field for Southeast Asia. The report links Cambodia’s vulnerability to the Kingdom’s economic ties with China — which showed weak performance last year, exacerbated by the trade conflict with the US — and dependence on tourism.
Where clarity can be found is in how countries can choose to adapt or up their game when it comes to investing in the drivers of economic growth, especially innovation. The report calls on Asia’s countries to embrace innovation in order to overcome the current difficulties and jump on the rebound and identifies five key drivers of innovation that should inform economic policy, namely: sound education systems, innovative entrepreneurship, conducive institutions, deeper capital markets, and dynamic cities that bring together top universities and forward-thinking firms.
A full copy of the report can be found here: