Despite the economic devastation caused by this year’s severe flooding, the government projects Cambodia’s economy will grow by 6 percent in 2001, with significant expansion in garment exports, construction and tourism.
A fiscal report prepared by Finance Minister Keat Chhon says Cambodia will experience continuous macroeconomic growth for the third year in a row, bouncing back from a low of 1 percent growth in 1997 and 1998 because of the country’s political turmoil and the regional financial crisis.
The growth in 1999 reached 4.3 percent—a little more than the government’s expectation. Growth in this year is projected at 5.5 percent.
“Cambodia’s economy has steadily recovered in 1999 and 2000,” Keat Chhon wrote in the fiscal report, part of the national budget 2001 proposal.
The government forecasts that agriculture production will increase 2.9 percent in the gross domestic product, up from 2.6 percent in this year. The growth is attributed to a 4.5 percent increase in rice crops and a 4 percent increase in livestock. The industry sector will see a 9.9 percent increase, thanks to a 16 percent rise in construction activities, the report states. The garment industry is expected to rise 7.4 percent and the energy sector 5.9 percent.
The service sector will be a driving force for the ambitious growth, the government forecasts. The fiscal report says the service sector, including telecommunications and financial activities, will likely grow more than ever, though percentages are not specified. Keat Chhon cites tourism as the most important factor to that rise.
According to the fiscal report, the government forecasts the inflation rate will stay at 4 percent, the same as in 1999 and 2000, and foreign exchange rate will remain stable at 3,800 riel per US dollar.
Economists, however, say the projection is too ambitious, citing the country’s economy has been devastated by the worst flooding in 40 years, causing an estimated $86 million in damage.
Urooj Malik, country representative of the Asian Development Bank, which is about to approve a $55 million loan package to the flood recovery efforts, said recently that flooding would slow down Cambodia’s economic recovery and poverty alleviation efforts.
Economists now suspect Cambodia will not achieve the 5.5 percent target in economic growth this year, saying it will fall 1 percent below the government’s expectation. The growth in 2001 will also likely be lower than the projection, they say.
“It would be terrific if it achieves a 6 percent growth,” said Paul Freer, an economic observer with International Management, Investment and Consultants. “It’s possible, but a little optimistic.”
Experts have said a 7 to 8 percent growth in GDP is needed for Cambodia build up its fledgling economy and reduce poverty.
Keat Chhon said the 6 percent target is a must to stabilize the country’s development. He said the government is ready to take all necessary measures to achieve it.