Cambodia’s GDP hit $10.5 billion in 2008, up from $8.6 billion in 2007 but still the slowest growth rate in six years, Finance Ministry Secretary-General Hang Chuon Naron said Sunday.
The National Institute of Statistics is now calculating the real GDP growth rate for 2008, which will take into account the year-on-year inflation rate of 13.46 percent, though in a telephone interview Hang Chuon Naron said the growth rate is likely to be about 7 percent.
This would be slightly higher than the World Bank’s projection of 6.7 percent GDP growth and the International Monetary Fund’s projection of 6.5 percent growth.
High inflation normally eats away at real GDP growth as money loses its purchasing power, Hang Chuon Naron said, adding that the NIS is expected to release final data in June.
NIS Deputy Director Khin Song declined to comment Sunday.
GDP grew strongly in the first half of 2008, Hang Chuon Naron said, but it took a hit in the final months of the year amid meltdown in the global economy and local real estate market, combined with slowdown in garment exports and foreign tourist arrivals.
“The impact was mainly on the fourth quarter,” he said.
Not since rice yields plummeted in 2002 because of severe drought and flooding has the GDP growth rate slipped below 8.5 percent.
The worst of the current financial crisis isn’t over, Hang Chuon Naron said, as in 2009 GDP is forecast to grow a mere 5 percent, a low not seen since the Asian Financial Crisis of 1998.
“There are different views about whether it will be 5 percent or not—-we do not know yet,” he said.
To boost the economy, Hang Chuon Naron said, the government budget includes a stimulus package that provides for extra spending on rural infrastructure and in the sectors of education, health and agriculture.
“More spending will offset the slowdown in, say, tourism. When tourists slow down, we need to spend more on other things, and it will balance out. We need more economic activity,” he said.
GDP for 2008 falls short of projections from the Economic Institute of Cambodia, which in October forecast GDP to hit $11 billion.
EIC economist Neou Seiha said the projection was based on 10-month data, further showing that the economy was hardest hit in the final months of the year.
While $10.5 billion is a smaller GDP than expected, Neou Seiha said “it’s not disappointing because it’s still [a] high [growth rate] compared to other countries in the region.”
However, in the past year, many laborers who lost their jobs in the sectors of tourism, garment and construction are back in the provinces working on rice farms, Neou Seiha said. These laborers hover just above the poverty line and will not be able to support themselves unless the government increases public spending, he said, especially in agriculture.
“[Workers] are being pushed back into poverty,” he said.