World Bank projects accelerated economic growth for Cambodia, highlighting the country’s potential in the post-pandemic recovery
In a positive boost to Cambodia’s economic prospects, the World Bank has upheld its growth forecast for the country, projecting a resilient economic expansion of 5.5 percent this year. The resurgence of the services sector, particularly tourism, has been instrumental in driving this post-pandemic recovery.
This optimistic projection stands in contrast to the recent revision by the Asian Development Bank (ADB), which lowered its growth forecast to 5.3 percent. Nevertheless, the ADB report maintains a promising outlook for Cambodia, forecasting a growth rate of 6.0 percent by 2024.
Based on the East Asia and Pacific Economic Update released by the World Bank, it is projected that Cambodia’s economy will experience a further acceleration, reaching a growth rate of 5.5 percent by the year 2023. The significant expansion can be mostly attributable to the revitalization of the services sector and breakthroughs in agriculture productivity. Anticipated advancements in products exports, diversification, and augmented foreign direct investment (FDI) resulting from the implementation of the new Law on Investment are expected to contribute to Cambodia’s noteworthy economic growth of 6.1 percent in 2024.
Aaditya Mattoo, chief economist of the World Bank’s East Asia Pacific Region, emphasized the potential benefits of the Regional Comprehensive Economic Partnership (RCEP) for Cambodia during a recent video press conference. Mattoo highlighted that the RCEP could enhance market access predictability and encourage policy reforms, ultimately boosting trade and investment flows. He further commended Cambodia’s venture into the electronics sector while stressing the necessity of strengthening the country’s fundamentals, including skills and connectivity, through domestic reforms.
While the World Bank’s report acknowledges a decline in merchandise exports due to reduced external demand, it points out the remarkable recovery of services exports. This is exemplified by the rapid rebound of Cambodia’s tourism sector, with international tourist arrivals reaching a staggering 3.0 million in the first seven months of 2023, representing 80 percent of the 2019 figures. Compared to regional counterparts Thailand and Vietnam, Cambodia has surpassed expectations, registering 66.6 and 58.5 percent of their respective 2019 tourist numbers.
Additionally, Cambodia demonstrated remarkable resilience in its agriculture sector, despite erratic weather patterns. Cultivation expanded by an impressive 24.5 percent year on year, covering 1.5 million hectares by July. This increase highlights the country’s potential for agricultural growth and its ability to contribute to the overall economic recovery.
While challenges in the education system have been identified, the World Bank’s report emphasizes the need for crucial reforms to support Cambodia’s expansion into more advanced sectors. It underscores the importance of strengthening the education system to meet growth objectives, particularly in the context of diversifying the economy beyond the garment industry.
With anticipated global growth expected to bolster Cambodia’s prospects in 2024, combined with the recent introduction of a new investment law, the country is well-positioned to attract further foreign direct investment (FDI) and drive sustainable economic growth.
Cambodia’s ability to weather economic storms and rebound strongly amidst challenges is a testament to its resilience. As the country continues to chart a path toward a diversified and vibrant economy, it remains poised to harness its full potential and take its place among prosperous nations in the region.