Solid Export Performance and Strong Domestic Demand Drive the Cambodia’s Growth

The economy remained robust, underpinned by solid export performance and strong domestic demand, according to the latest edition of the World Bank’s Cambodia Economic Update report, released today. However, real growth is expected to decelerate to 7.0 percent in 2019, down from 7.5 percent in 2018.

Garment and footwear exports, accounting for about 70 percent of total merchandise exports, grew at 17.7 percent in 2018, but eased slightly to 15.3 percent in June 2019. Bustling construction activity has continued, reflecting a sustained appetite for investment. As a result, steel imports skyrocketed, rising 63.5 percent in June 2019, up from 27.7 percent in 2018.

Risks in the financial sector continue to grow, with increased exposure to the construction and real estate sector alongside rising indebtedness—where combined bank and microfinance credit now accounts for over 100 percent of GDP. A possible withdrawal of the Everything But Arms (EBA) initiative, as well as a sharp slowdown in the Chinese economy (a potential outcome of continued U.S.-China trade tensions), could substantially dampen Cambodia’s growth prospects.

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