Cambodia Braces for Global Finance Woes
Cambodia's slowing economy could face extra pressure in garments and tourism amid US and Asian market worries, economists warned Wednes
Economic turbulence in the US and Asian markets this weekwill indirectly affect Cambodia's industries, even as inflation and otherfactors have weakened the economy so far this year, economic and financeexperts said Wednesday. The bankruptcy announcement by US financial firm Lehman Brothersand the sale of brokerage firm Merrill Lynch to Bank of America this week upsetUS and Asian markets and led to worries of a global economic crisis. "The longer term concern is that the world economy willbe impacted and that will have follow-on effects for Cambodia, but how big those effectswill be remains to be seen," said Stephen Higgins, chief executive officerof ANZ Royal Bank. Cambodian and international economists said Wednesday fallingmarkets could harm Cambodia'sleading sectors: garments and tourism. The US isthe top importer of Cambodian garments, and the sector, which is Cambodia'seconomic engine, already has seen weakened growth in 2008, analysts said. Tourism,the second-highest earner for Cambodia,could be hurt as potential visitors stay at home to weather the economic storm. Cambodiacould also be affected by a drop in foreign investment from its Asianneighbors. "One thing that we would need to keep a close watch onis sort of providing finance to Cambodiain terms of foreign direct investment," said Eric Sidgwick, an economic officerat the Asian Development Bank in PhnomPenh. "You know, China,Korea, Thailand andother countries. How will they be affected by the turmoil in the US?They may in turn have less resources to bring to Cambodia." Meanwhile, the Asian Development Bank said in an outlookreport released Tuesday that Cambodia'seconomic growth would drop to an estimated 6.5 percent, down from 9.6 percentin 2007. The decline in economic growth was a product of a garmentsector suffering from the decline of US consumption, as well as inflationand the drop in value of the US dollar, the ADB said.