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IMF Predicts Little Growth in 2009

The International Monetary Fund forecasts that the world economy will recover by 2009 in some countries and 2010 in others. It also says that aid-dependent Cambodia will have only 4 percent economic growth in 2009.

The IMF said that the world economic crisis projects negatively in advance economies with -2 percent and some growth in emerging economies around 3.3 per cent. Those figures are the lowest the world has experienced in the post-war period.

Dominique Strauss-Kahn, Managing Director of the IMF, said: “We expect some recovery at the beginning of 2010; for some countries, end of 2009. Of course, those forecasts are very uncertain, and it depends a lot upon the policy which may be implemented today and in the coming months.”

Strauss-Kahn said that two factors will contribute to the recovery: the global economy, led by the US economy, and the European economy. Another factor is the big stimulus, both on the monetary side and fiscal side, being implemented by major Asian countries.

Hang Chuon Naron, Secretary General of the Supreme National Economic Council, said that the government of Cambodia has put in place some preventive measures, including extending a 2006 profit tax exemption for garment sector and focusing on building infrastructure as well as increase spending on some priority areas.

“We will do our best to ensure between 4 to 5 percent economic growth,” Hang Chuon Naron said. If we cannot go up to 7 percent, 5 percent is still high. Reaching 5 percent will be our great achievement.”

Cambodia still depends on international assistance for its development projects. In 2008 development partners pledged nearly one billion dollars.

“One thing that is very important and interesting in the Cambodian case is that they had rather high growth last year, but it was the first time for a very long period. So for political reasons, historical reasons, growth had been rather low, and then they had a very strong increase…and then this increase and this recovery has just been destroyed by the crisis,” said Strauss-Kahn warning that donors’ countries being in crisis making their willingness to help and the amount which can be used for foreign aid will decrease.

Kang Chandararoth, an economic analyst and head of the Cambodia Institute of Development Study, said Cambodia’s economic growth depends also on its investment partners.

“Whether Cambodia is out of economic recession or not depends on our economic partners,” he said. “Firstly, it is the United States that is our exporting partner. Secondly it is the recovery of our main investors, like South Korea, China and other Asian countries.”

Cambodia’s economic growth hit 7 percent in 2007.