As Cambodia deals with its most serious COVID-19 community transmission, economists and observers are doubtful if the economic rebound expected this year will happen.
The Cambodian economy registered a contraction of 3.1 percent in 2020, according to the Ministry of Economy and Finance. The ministry, at the time, had hoped for the economy to recover this year and predicted GDP growth of 4 percent.
But, as of this week, the Ministry of Health recorded 712 locally-transmitted cases in Phnom Penh and ten other provinces, with the current outbreak more than doubling the country’s entire case count before February 20.
The new outbreak – which sadly resulted in Cambodia’s first COVID-19 death – has resulted in the shuttering of schools in certain provinces and districts, a travel ban in Preah Sihanouk and a work-from-home directive by the government.
Ky Sereyvath, who heads the China Study Center at the Royal Academy of Cambodia, said the government should contain the virus outbreak as soon as it can to alleviate impacts that could be felt by the economy.
“If the outbreak situation prolongs, I believe that our economy cannot make a rebound this year,” Ky Sereyvath said on Friday.
The academic said the authorities should consider a month-long hard lockdown to control the spread of the current outbreak, after which the country could hopefully return to normalcy.
“By June or July, if we can keep it under control and bring back a better situation, the Cambodian economy could expect to grow between 1 to 2 percent,” he said.
Chheng Kimlong, director of the Asian Vision Institute’s Centre for Governance Innovation and Democracy, said the outbreak would hurt local consumption, the service sector, and export production.
“Exports could be disrupted, making it possible that the 2021 growth could be lower than the Ministry of Economy and Finance’s forecast,” Chheng Kimlong said.
The country’s foreign debt increased by 17 percent last year, from $7.5 billion in 2019 to $8.8 billion by the end of December, according to the Finance Ministry.
But, to save the private sector from large-scale collapse, Kimlong urged government to consider another fiscal intervention: further tax breaks to keep businesses and the private sectors afloat.
“The state needs to do whatever possible,” Kimlong said. “The revenue collection could drop in the short term but it will save enterprises and businesses from going bankrupt, which would make the situation worse.”
Finance Ministry Spokesperson Meas Soksensan could not be reached for comment on Friday.
Ken Loo, secretary-general of the Garment Manufacturer Association in Cambodia, said the current outbreak was adding stress to the private sector.
“We continue to stay vigilant,” Ken Loo said. “Of course, we are more worried now than before but all factories [are] still operating as usual.”
The outbreak and a work-from-home order have resulted in near-deserted streets in Phnom Penh and Preah Sihanouk province. Fear of the virus has already cost Voeun Sivorn, a chicken vendor in the coastal province, her daily income.
The chicken vendor recently took a $25,000 loan to build rental rooms at her home in Prey Nob district.
“It used to be quiet but this is even eerier and extremely quiet,” Voeun Sivorn. “If it keeps dropping, I fear [my business] will fall to zero soon.”
“How can I not be fearful? I am very scared but I cannot stop as I have the bank loans to repay,” she said.
Asian Vision Institute’s Chheng Kimlong said a prolonged outbreak could spell further trouble for the likely-distressed microfinance sector.
“The situation brings an additional burden to indebted individuals, meaning they face the additional burden of earning little income to repay the debts,” Chheng Kimlong said.
For the economic recovery to take place, it would take a lot more than just controlling the current outbreak, said Miguel Chanco, a senior Asia analyst with consultancy firm Pantheon Macroeconomics, such as an effective vaccination program.
“Much will depend on how quickly international travel returns to normal, which will be crucial for the recovery in tourism, and this will depend both on the pace of vaccination domestically in Cambodia, as well as in its key markets for tourism, such as in China, Vietnam, Thailand and Korea,” he said.