The Asian Development Bank (ADB) is maintaining its predictions for strong economic growth of 7 percent and 7.1 percent this year and next, respectively, largely on the strength of a still robust garment sector.
In an update of its 2016 forecast for Asia released on Tuesday, the ADB, citing Cambodian government figures, said the country’s garment exports grew 9.4 percent in value during the first half of this year compared with the same period last year, when first-half exports hit $3 billion. The solid growth of the sector, one of the country’s main economic engines, comes despite steadily rising wages and fears of shrinking profit margins for factories.
The bank also forecast more healthy domestic demand and some recovery for the agriculture sector.
“The outlook for Cambodia’s economy, after attaining lower-middle-income status in July, remains robust with exports from the garment and footwear industry rising by 9.4 percent in the first half of this year,” ADB country director Samiuela Tukuafu said in a statement.
“While growth in credit to the private sector moderated to 28.1 percent year-on-year in June 2016, it still indicates buoyant domestic demand. Better weather since June, following an extended drought, should help a mild recovery in agriculture.”
The bank is also holding steady on its growth forecasts despite higher than expected inflation this year and next due to increases in local food costs and global oil prices.
The positive forecast also comes amid concerns of slipping profit margins in the garment sector and another pending hike in the industry’s minimum wage.
In its latest bulletin on Cambodia’s garment sector last month, the International Labor Organization said it saw strong growth so far this year. But it warned that investment in the sector could begin to slow if garment worker productivity failed to keep pace with the rising minimum wage, now at $140 per month.
The government raised the garment workers’ minimum wage by $12 this year and is proposing another raise of more than $8 for next year.