Cambodia will register its slowest growth since 1994, contracting by between -1 percent and -2.9 percent, putting at least 1.76 million jobs at risk, according to the latest World Bank’s economic report.
The report titled, “Economic Update for Cambodia in a time of COVID-19,” outlines that poverty in Cambodia could increase among households in key economic sectors of between 3 to 11 percent higher than current levels.
With the country’s fiscal deficit possibly reaching its highest level in 22 years, public debt is expected to rise to 35 percent of gross domestic product by 2022.
“The collapse of growth drivers has hurt economic growth and put at least 1.76 million jobs at risks,” the report said.
It also warns that capital inflows are tapering off, which in turn is triggering the easing of real estate market prices, likely ending the construction boom. With the current large outstanding credit to the construction, real estate, and mortgage sector, nonperforming loans could rise.
“The global shock triggered by the COVID-19 pandemic has significantly affected Cambodia’s economy,” said Inguna Dobraja, World Bank Country Manager for Cambodia.
“The World Bank is committed to helping Cambodia deal effectively with the COVID-19 crisis and strengthen the economy for recovery and future resilience.”
In response to the COVID-19 shock, the World Bank recommends policy options that aim at providing
urgent economic relief and public health protection in the immediate term, underpinning an economic recovery in the short term, and fostering macro-fiscal and social resilience in the medium term.
Effective business continuity plans and use of digital technologies are needed to ensure uninterrupted provision of relief programmes and service. The plans set out contingency measures to minimise disruptions to the organisation’s operations in case of crisis by leveraging emerging digital and information technologies.
The effectiveness of government intervention will be essential to facilitate economic recovery. The COVID-19 pandemic will likely have major implications on how regional and global trade and investment will be conducted going forward, with expected major shifts in trade and migrant policies and flow of goods and services.
There is a need for the authorities to think on a future where strengthening domestic demand, protecting the local consumer purchasing power amid external shocks of public health and/or natural disasters, and increasing production for domestic consumption, are the way to move forward. In this regard, intervention measures recently introduced by the authorities include tax relief and improved access by small businesses and household enterprises to cheaper credit using co-financing facilities between the newly established Small and Medium Enterprise Bank of Cambodia (SME Bank) and commercial lenders (banks and microfinance institutions).
Similarly, additional capital injection of $50 million for the Agriculture and Rural Development Bank has been provided to support agri-processing firms and emerging agribusinesses. However, the success of the measures hinges on targeting appropriate small, medium and large firms and enterprises that are efficient and viable but lack cheaper financing sources to create jobs, to run profitably and to export. This should also include family and small firms operating in retail and low-end tourism, where large numbers of informal or semiformal firms might either be affected by the pandemic or not. The final step is to ensure economic and social resiliency in the medium term after the outbreak has been brought under control. Refocusing and re-energising efforts and sources that might have been interrupted or diverted to cope with the COVID-19 outbreak to moving forward with key structural and sectoral reforms is crucial.
This article was first published in Khmer Times. All contents and images are copyright to their respective owners and sources.