Cambodia's economic growth rate will be slashed by more than half compared to 2007, as a financial slowdown continues to plague world markets, the International Monetary Fund said Friday.
Cambodia's economic growth rate will be around 6.5 percent for 2008 and will decrease to 4.25 percent next year, the IMF said, reporting findings of a visit in recent weeks. Those numbers starkly differ from Cambodia's halcyon growth rate of 10.25 percent in 2007.
Cambodia's "narrow production and export base" will subject it to the global markets, said David Cowen, deputy division chief of the IMF's Asia and Pacific Department.
The global economy has constricted amid ripples of a US sub-prime mortgage meltdown, shrinking consumer confidence, and tumbling stock markets.
"Cambodia's economy will not be immune to this slowdown," Cowen told reporters.
The IMF noted on its visit a sharp increase in inflation driven by higher fuel and food prices, as well as the weakened US dollar, which Cambodia follows, and heavy domestic demand for goods.
"Following several years of very strong performance, Cambodia's economy faces a number of challenging headwinds," the IMF said in a statement Friday. "After a robust start, growth momentum eased over the course of 2008, and more recently the economy has begun to experience adverse effects from global 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's economic slowdown is following the global financial crisis, which has slowed down foreign trade to Cambodia," Finance Minister Keat Chhon told reporters on Monday. "We must increase agricultural production and increase the [value added tax] on agricultural products for export. And we are trying to attract foreign investment by all means to come to develop in Cambodia."
Garment exports and tourist arrivals—the two main engines of Cambodia'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 for 2008 would come to around 15.5 percent, following its highest point, 26 percent, in May.
The IMF commended the government on "steady budget implementation, particularly through the election period," and for improved tax administration.