Expected Growth Not Enough To Weaken Poverty’s Grip

Economists from the Cambo­dia Development Resource In­stitute are predicting increased economic growth for the next five years but warn that the financial upturn still won’t be enough to seriously dent in the country’s poverty problem.

The estimated annual growth of 5 percent to 7 percent will not be enough to absorb the almost quarter million people expected to enter the work force each year, according to Sok Hach, a macro-economist with the CDRI.

“This kind of economic growth will not significantly curb poverty is rural areas,” Sok Hach said.

International economic obser­vers say Cambodia would need to see annual growth of 7 percent to 8 percent to reduce poverty. The government has projected growth of 6.1 percent, but the country failed to reach that target this year, falling a little more than 2 percent short after severe flooding and lower than expected gains in tourism and foreign investment, Sok Hach said.

Agriculture is expected to fall

7 percent short of its target this year, according to CDRI findings, resulting in a 200,000 ton shortfall in rice. Flood damage is the primary reason for this, Sok Hach said.

But economists estimate the agriculture sector will recover in 2001, gaining 3 percent. While the service sector is expected to remain flat, industry is experiencing a sharp 22 percent gain, in part due to increased textile production.

However the garment industry, Cambodia’s biggest money-maker in terms of exports, isn’t expected to see the large rises that have characterized the previous few years, according to economists.

Tourism, which the government hopes will become a major source of revenue, rose only 10 percent this year—also falling below the projected target. But government officials are predicting huge increases in the number of visitors coming primarily to Angkor Wat. Tourism figures have steadily increased since Cambodia’s economy took its last major blow following the July 1997 factional fighting.

Both government officials and international observers say the brief skirmishes that occurred Nov 24 are likely to damage Cambodia’s prospects for foreign investment.

Political stability is a key component to successfully reaching the estimated five-year growth targets, Sok Hach said.

“[The 5 percent to 7 percent growth] is based on optimistic assumptions that the political environment will be good, administrative reform will progress and there will be no severe natural disasters,” Sok Hach said.

Economists also say flood relief and other aid pledged by the international community is essential for Cambodia to reach the 6 percent growth predicted by the government.

Inflation and the foreign ex­change rate are both expected to remain stable, according to the CDRI.

 

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