Cambodia ‘Not Immune’ to Global Crisis: IMF
Drops in tourist visits and garment orders were expected to clip Cambodia's growth rate, the international lender said Friday. (07 Nove
Cambodia'seconomic growth rate will be slashed by more than half compared to 2007, as afinancial slowdown continues to plague world markets, the InternationalMonetary Fund said Friday. Cambodia'seconomic growth rate will be around 6.5 percent for 2008 and will decrease to4.25 percent next year, the IMF said, reporting findings of a visit in recentweeks. Those numbers starkly differ from Cambodia's halcyon growth rate of10.25 percent in 2007. Cambodia's"narrow production and export base" will subject it to the global markets, saidDavid Cowen, deputy division chief of the IMF's Asiaand Pacific Department. The global economy has constricted amid ripples of a US sub-primemortgage meltdown, shrinking consumer confidence, and tumbling stock markets. "Cambodia'seconomy will not be immune to this slowdown," Cowen told reporters. The IMF noted on its visit a sharp increase in inflationdriven by higher fuel and food prices, as well as the weakened US dollar, whichCambodia follows, and heavy domestic demand for goods. "Following several years of very strong performance, Cambodia'seconomy faces a number of challenging headwinds," the IMF said in a statementFriday. "After a robust start, growth momentum eased over the course of 2008,and more recently the economy has begun to experience adverse effects fromglobal financial stress." Cambodian officials have already acknowledged a slowdown, while large construction projects in Phnom Penh have been put on hold and microfinance lenders have reduced operations. "Cambodia'seconomic slowdown is following the global financial crisis, which has sloweddown foreign trade to Cambodia,"Finance Minister Keat Chhon told reporters on Monday. "We must increaseagricultural production and increase the [value added tax] on agriculturalproducts for export. And we are trying to attract foreign investment by allmeans to come to develop in Cambodia." Garment exports and tourist arrivals—the two main engines ofCambodia's economy—were both slowing, the IMF said, part of a "rapid downturn"in the economies of its trading partners. The IMF also estimated that the overall inflation rate for2008 would come to around 15.5 percent, following its highest point, 26percent, in May. The IMF commended the government on "steady budget implementation,particularly through the election period," and for improved tax administration.