Cambodia’s GDP will grow by 2.5 percent in 2009 as the construction, tourism and garment sectors experience negative growth, al-though agriculture will continue to expand as long as weather is favorable, the Asian Development Bank predicted Tuesday.
Though ADB’s figures are more optimistic than an International Monetary Fund prediction of mi-nus 0.5 percent GDP growth this year, ADB senior country economist Eric Sidgwick said 2.5 percent GDP growth is not healthy.
“Is that good? No, not if you are Cambodia. That is a growth rate that Cambodia has not experienced for close to a decade or perhaps even more,” Sidgwick said at the launch of the ADB Outlook 2009 report.
“Having several years of lower growth would really have an im-pact on poverty and society in general,” he said.
Sidgwick predicted that the tourism sector will decline by 2 percent, the construction sector by 1.5 percent, and the garment sector by 5 percent, though agriculture will grow by 5 or 6 percent.
Growth last year slowed to 6.5 percent after a decade in which the GDP averaged about 10 percent.
Growth in 2010 is projected to be about 4 percent, though Sidg-wick said that with the economy constantly changing the figures could also change.
“This is a moving target,” he said of predicting GDP figures.
“I think the margin of error ar-ound any projections, whether they are from us or anybody else, is extremely high.”
Inflation, he added, should lower to below 10 percent after having hit 25.7 percent in May.
Overseas markets, on which Cambodia’s tourism and garment sectors depend, will need to recover in order to boost Cambodia’s growth rate, he continued.
“Cambodia needs to use this experience to start making some of the reforms that are necessary to diversify the base of the economy,” he said.
In early March, Prime Minister Hun Sen called dismal predictions about Cambodia’s economy unimportant though a month earlier in February he predicted 6 percent growth for 2009.
Sidgwick said the ADB’s prediction is more optimistic than the IMF’s because the ADB predicts higher growth of 5 or 6 percent in the agriculture sector compared to 4.5 percent growth in 2008.
“Assuming favorable weather, it’s hard to see how agricultural output would be lower,” he said.
John Nelmes, country representative for the IMF, wrote Tuesday that agriculture will only grow 1.5 percent due to dwindling commodity prices, which will lower profits and expansion in 2009. The IMF predicts declines of 5 percent in garments, 6 percent in tourism and 2 percent in construction, he wrote.
“Recent data show that our projections for these sectors may in fact be too optimistic,” Nelmes said.
Chan Sophal, president of the Cambodian Economic Associa-tion, said it was hard to disagree with either prediction.
“It confirms that things are getting worse than expected,” he said. “We never know what’s going to happen in the world, and Cam-
bodia is very dependent on the world,” he said.
He predicted that agricultural production will increase but be offset by falling commodities’ prices.
Still, Kang Chandararot, executive director of the Cambodia Insti-tute of Development Study, called the ADB’s prediction “pessimistic” and said donor country pledges
of more than $1 billion will keep growth going. Using that money to develop rural economies will have big impact, he said.
“Rural development and rural economy, these can mitigate the general impact of the financial crisis in Cambodia,” he said.
CPP Lawmaker Cheam Yeap, head of the Assembly commission on finance, said Tuesday that he is grateful for the ADB’s prediction, but that projections can be wrong, adding that he believes Hun Sen’s prediction to be more accurate.
“Cambodia has had little effect from the global financial crisis while America and other counties have serious effects,” Cheam Yeap said.
However, bad economic news from the crisis is abundant in Cam-bodia. In February the value of garment exports declined 56 percent compared to 12 months earlier. Tourism also slowed to 5.5 percent growth overall in 2008, after years of growth near 20 percent.
(Additional reporting by Chhorn Chansy)