With tens of thousands of hectares of rice paddy already lost to floods that have devastated Cambodia for weeks, the government yesterday lowered its outlook for this year’s economic growth to 6 percent.
Speaking in Phnom Penh on the sidelines to a trade and investment conference organized by the International Business Chamber of Cambodia, an association of businesses, Finance Minister Keat Chhon said the government’s previous projection of 7 percent gross domestic product growth for 2011 was now out of reach.
“We are very careful in calculating economic growth for 2011. We no longer say that growth will be 7 percent any more, and we reassess it to be around 6 percent,” he said.
In a speech, Mr Chhon also said growth in the agriculture sector would reach just 3.6 percent this year, down from 4 percent in 2010. Earlier this year, the Ministry of Finance predicted growth in the agriculture sector, which accounts for a third of Cambodia’s economy, to reach 4.7 percent.
Still, Mr Chhon said the government was sticking to its goal of exporting 1 million tons of rice by 2015.
Nevertheless, Kong Vibol, secretary of state at the Ministry of Finance, said in a speech at the conference that Cambodia would export just 180,000 tons of rice by the end of the year, a sign of just how much work there is left to do before the government reaches its target.
There are other dark clouds that could dampen Cambodia’s economic growth this year. Speaking at the conference, officials and economic experts said that slow growth in the US could result in a dip in demand for garments as 2011 draws to a close.
Mr Chhon also said there was some uncertainty that Cambodia’s recently launched stock market would start trading this year, despite previous claims that the first companies would list before the end of the year.
“The operation should begin operating smoothly in January,” he told reporters on the sidelines to the conference.
Indeed, the optimism that was being expressed by investors and the government at the beginning of the year – particularly among bankers who are growing their loan portfolios at a fast tick – is now being curbed.
Last month Prime Minister Hun Sen even said that economic growth could reach 8.7 percent in 2011, a prediction that was also shared by the Economic Institute of Cambodia (EIC), a local think tank.
But Neou Seiha, a senior researcher at EIC, said that his organization would lower its estimate in line with the government’s prediction of between 6 and 7 percent.
“GDP growth should be reduced but we don’t have accurate figures for the damage yet,” he said in an interview. He added that economic growth would hinge on the economic recovery in the US, Cambodia’s largest export market.
The Asian Development Bank yesterday said it too would slash its growth estimate this year due to the damage caused by the flooding.
So far 150,000 hectares of rice paddy have been destroyed and another 200,000 hectares remain flooded and risk being lost, according to the latest government figures.
Putu Kamayana, country director for the Asian Development Bank in Cambodia, said that while the ADB still predicted strong growth in many areas of the economy, the flooding had taken a serious toll.
In September the ADB predicted economic growth in 2011 to reach 6.8 percent. But that figure is expected to drop by the end of the year.
“We agree that [GDP growth is] possibly going to decline to around 6.5 percent because of the impact of the floods and the global volatility and slowdown in Cambodia’s key export markets, which will continue to have an impact next year,” Mr Kamayana told investors at the conference.