Budget, Trade Deficits Remain a Concern, ADB Says

Though forecasting economic growth of 6 percent next year, the Asian Development Bank said in a report yesterday that rising trade and budget deficits had become “worrying” in Cambodia.

During the course of the financial crisis last year when Cambodia was in a recession, the government increased deficit spending to 5.9 percent of GDP, up from just 2.8 percent the previous year.

And that amount is set to reach 7.4 percent of GDP this year, despite advice from the ADB, Work Bank and International Monetary Fund to tighten stimulus spending.

“[T]he double-digit current account deficits in Cambodia and Lao PDR are worrying,” the ADB said in periodic update for the region’s economies. “The region’s governments should take stock of the effectiveness of fiscal stimulus.”

The only other country with a larger budget deficit than Cambodia is Vietnam, which is projected to spend 8.3 percent of GDP this year, according to the report.

Despite worries outlined in the report, Peter Brimble, the ADB’s senior country economist, said figures used in the report were not in line with projections that have been made more recently.

He said that the ADB had since projected the budget deficit to fall to about 5.3 percent of GDP by the end of the year.

“It looks as tough the government is working quiet hard to meet that target,” he said.

Mr Brimble added that he also thought Cambodia’s trade deficit would decrease next year as garment exports continue their revival and more agricultural products such as rice are exported.

He also said that an increase in tourism receipts would continue to bolster the recovery.

To curb government spending, Prime Minister Hun Sen has put a freeze on hiring civil servants apart from teachers and medical staff.


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