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Four Percent GDP Growth Hinges on Current Outbreak, ADB Says

Garment factory workers and staff wait to receive China's Sinovac coronavirus disease (COVID-19) vaccine at an industrial park in Phnom Penh, Cambodia, April 7, 2021. REUTERS/Cindy Liu
Garment factory workers and staff wait to receive China's Sinovac coronavirus disease (COVID-19) vaccine at an industrial park in Phnom Penh, Cambodia, April 7, 2021. REUTERS/Cindy Liu

The Cambodian economy will rebound by 4 percent this year, according to an Asian Development Bank forecast, depending on how long the current COVID-19 cluster persists.

Experts at the Asian Development Bank said on Wednesday the 4 percent figure was based on statistical inputs and figures as of March 31. This was well before the current COVID-19 outbreak spread which led to significant lockdowns in some parts of the country, including Phnom Penh.

“The economic recovery in major trading partners will support strong demand for Cambodia’s merchandise exports and continued foreign direct investment,” the ADB’s Asian Development Outlook published on Wednesday reads.

The report shows 7.1 percent growth for the industry and manufacturing sector, 1.3 percent for agriculture, and 3.3 percent in the services sector.

“Manufacturing is positioned for strong growth, but border closures and continued weaknesses in constructions and real estates will slow down the recovery,” said Poullang Doung, a senior economic officer at the ADB’s Cambodia office.

The economic officer added that the government’s revenue collections are expected to drop while expenditure is expected to grow on account of the government's response to the COVID-19 outbreak.

Labor Ministry Spokesperson Heng Sour said in a press conference on Wednesday that the infections had reached 205 factories, 1,673 garment workers had the disease and 17,000 others were living in quarantine.

He said the government’s decision to end a nationwide travel ban, targeted vaccination of workers, and a decision to designate three separate risk levels for places with COVID-19 cases were, in part, to ensure the garment industry’s operability.

“We have asked the global brands and buyers not to discipline factories or change its sourcing to other countries, and we tell them that we are committed to the maximum level of safety efforts to resume our production chains and supplies,” Heng Sour said.

David Freedman, the country economist at ADB’s Cambodia office, said real growth would depend on how long the outbreak will last and the speed at which the economy can bounce back post-outbreak.

“Our view is that it is certainly possible with the quick recovery and rollouts of the vaccines, the growth outlook will not be significantly impacted by the current outbreak,” Freedman said.

“But at the moment, it is quite hard to judge. It will depend on what happens in the next one or two months. There are clearly downside risks…but I think it is a little bit too early to say definitely that the growth is going to be lower than this.”

He also warned that household indebtedness posed further risks for families during the lockdown.

The ADB report also highlighted the woes in the financial and banking sectors.

“The sector remains well-capitalized, but rising nonperforming loans and loan impairments could put pressure on individual banks and microfinance institutions, threatening the sector’s stability,” the report reads.

ADB’s forecast is similar to a Finance Ministry projection in January of a 4 percent growth rate for this year. Ministry Spokesperson Meas Soksensan could not be reached for comment on Wednesday.