The Asian Development Bank on Tuesday lowered its growth forecasts for Cambodia, adjusting its projection for 2015 to 7 percent and its 2016 projection to 7.2 percent amid a slowdown in a number of the country’s key industries.
The revisions were part of an update to the ADB’s Asian Development Outlook report, which in March had predicted GDP growth of 7.3 percent and 7.5 percent in 2015 and 2016, respectively.
In a statement released by the ADB on Tuesday, senior country economist Jan Hansen said that Cambodia’s economic growth continued to be driven by “expansion of garment manufacturing, construction and services.”
“Growth in exports and tourism, however, decelerated somewhat in the first half 2015, while agriculture has been affected by prolonged low rainfall,” Mr. Hansen said.
The updated report notes that garment and footwear exports grew by 11 percent year-on-year, down from 14.5 percent in the first half of 2014, while total merchandise exports grew by 14 percent, down from 18.3 percent the previous year.
It adds that growth in the number of tourists arriving in the first half of the year had also slowed, to 4.6 percent from 5.2 percent in the same period last year.
Despite these slowdowns, the ADB noted that domestic demand did not appear to have weakened.
“Data indicate that domestic demand is holding up, based on 33.3% year on year expansion of credit to the private sector in May and indications of high growth in imports,” the report says.
According to Stephen Higgins, managing partner of corporate consultancy firm Mekong Strategic Partners, the latest revision to the ADB’s projected growth numbers was “effectively a rounding error.”
“Whether the performance this year is 7.3% or 7.0%, I don’t think anyone would notice the difference,” Mr. Higgins said in an email.
Jayant Menon, lead economist at the ADB’s regional integration office, said Mr. Higgins’ “rounding error” description was accurate.
However, he added that in order to stay competitive in exports, Cambodia’s garment sector needed to work on internal improvements.
“It needs to really focus on increasing scale and productivity,” Mr. Menon said.
Independent economist Srey Chanthy said that despite the ADB’s downgrade, Cambodia’s growth was still robust, but he harbored concerns about next year’s growth figure.
“I am still concerned about agriculture, tourism and export, and the strong dollar,” Mr. Chanthy said in an email.
“For 2016, things look [more] uncertain yet; 7.2% is optimistic,” he said, adding that low-wage competitors could slow the country’s economic growth.
“Cambodia should put India and Burma [on] its radar screen.”