The Asian Development Bank plans to reduce the level of economic growth it has predicted for Cambodia in 2009, an ADB economist said Monday, a statement that comes on the heels of the International Monetary Fund’s forecast of a recession.
The IMF prediction, released Friday, that Cambodia’s GDP will shrink by 0.5 percent sharply contrasts with the 6 percent growth prediction made by Prime Minister Hun Sen last month.
In December the IMF, ADB and World Bank predicted growth of 4.8 percent, 4.7 percent and 4.9 percent respectively. Growth was approximately 6.5 percent in 2008, according to the ADB. Cambodia enjoyed double-digit growth from 2003 to 2007.
“Yes, our predictions for growth for 2009…will be lower than those of last December,” ADB senior country economist Eric Sedgwick wrote in an e-mail Monday.
Sidgwick wrote that the ADB is still calculating its prediction and will release its figures at the end of the month.
The ADB is changing its forecast due to the “global financial crisis and related onset of recession in Cambodia’s major export markets, including sharp downturns in garment exports and tourism over the last few months,” he wrote.
Finance Ministry Secretary of State Ouk Rabun declined to comment Monday and ministry Secretary-General Hang Chuon Naron wrote by e-mail that Ministry of Finance staff have been instructed not to comment on the recent IMF forecast until Hun Sen makes an official announcement.
Eang Sophalleth, Hun Sen’s assistant, could not be reached Monday, and it is not known when such an announcement might be made.
Douglas Clayton, CEO of the private equity fund Leopard Capital, said Monday that while a recession will restrict investors who require loans, those who already have investment capital will fare well.
A weak economy lowers the cost of investment and encourages some investors to seize opportunities, he said.
“I think Cambodia has so many inherent opportunities. It’s starting from such a low base,” he said. “I think that within two or three years we’ll be back on the growth path.”
But not everyone is seeking new opportunities this year.
After years of launching new projects, local conglomerate Royal Group will focus this year only on current ventures, said managing director of development Debasish Pattnaik. Royal Group has stakes in MobiTel, ANZ Royal Bank, CTN television, Infinity Insurance, The Cambodiana Hotel, KFC fast-food outlets and other businesses.
“Stay where you are. This is where we are at,” Pattnaik said. “We’re still growing but not at the pace we wanted to do.”
Royal Group has revised its budget for 2009, lowering its planned increase over the 2008 budget from 30 to 40 percent to just 10 to 20 percent, he said.
The government needs to revise its economic policies, which should include the creation of a stimulus package, he added.
If more steps aren’t taken “it will take a long time for a country like Cambodia to get back on its feet,” Pattnaik said.
Roger Tan, secretary-general for the Garment Manufacturers Association in Cambodia, said members of his industry are more concerned with the economic situation in the US, the European Union or China —all of which import the clothing made in Cambodian factories.
In an industry that has already seen firings and closures, he said, the government can help by lowering the cost of production and improving efficiency of exports.
Either way, Roger Tan said, garment companies, like other Cambodian businesses, are bracing for a difficult year.
“Bad news has already been here,” he said Sunday by telephone. “The only fear is that it continues to come.”
(Additional reporting by Frank Radosevich)
