With the easing of social distancing measures, domestic economic activity is gradually returning to normal. Consumption is being partly underpinned by unprecedented government intervention, while inflation remained subdued. FDI inflows to projects in non-garment industries and agriculture have been rising, likely attracted by Free Trade Agreements, according to the report.
Although total manufacturing exports have been hit by the pandemic, exports of bicycles, electrical parts, and vehicle parts and accessories are rising, and exports of rice and other agricultural commodities have surged. Domestic tourists have supported a partial recovery of the travel and tourism industry.
“Significant uncertainty remains to Cambodia’s growth outlook. The most important policy goal must be to urgently regain jobs lost and suspended due to the pandemic,” said Ms. Inguna Dobraja, World Bank Country Manager for Cambodia.
“Looking ahead, it is essential that domestic and foreign investments are encouraged to take advantage of recent bilateral and regional free trade agreements. This would be possible through prompt introduction of a competitive investment law and incentive schemes, together with moves to improve the ease of doing business.”
To help the country quickly recover from the pandemic, the report recommends boosting pro-poor and growth-enhancing public investment including cash-for-work projects, while promoting labor-intensive sectors to generate jobs by taking advantage of the quick recovery of domestic demand for consumer goods.
It also notes the opportunities to facilitate an expansion of domestic and foreign investment arising from recent bilateral and regional free trade agreements, including the Cambodia-China Free Trade Agreement and Regional Comprehensive Economic Partnership (RCEP).
The report also points out the critical importance of developing a strong COVID-19 vaccine infrastructure, as well as closely monitoring economic vulnerabilities arising from the prolonged construction and property boom
The Cambodia Economic Update is a biannual report that provides up-to-date information on short- and medium-term macroeconomic developments in Cambodia. Chea Vannak – AKP