Prime Minister Hun Sen said the government would push for economic and administrative reforms this year as he lauded last year’s economic stability in a speech Wednesday in Kompong Cham province.
“We have to take careful measure for budget allocation,” the premier said. “A real grenade can destroy one or two villages, but an economic grenade can destroy people throughout the country.”
Economists say prospects are looking up for the country following a year of uncertainty.
The anti-Thai riots, the Iraq war, severe acute respiratory syndrome and a global economic slowdown last year, plus an ongoing political deadlock, all contributed to a drop in tourist arrivals and government revenue in 2003.
The economy grew by an estimated 4.5 percent last year, down from about 5.5 percent growth in 2002.
Despite the drop in growth, said Sok Hach, director of the Economic Institute of Cambodia, the economy is stronger than in 1997, when factional fighting caused the economy’s growth rate to drop to around 1 or 2 percent.
“The Cambodian economy is more resistant to shocks than before,” he said Wednesday.
Government revenue dropped by 1.7 percent through the first 11 months of 2003 compared to the same period last year—about 19 percent below budget anticipation, an EIC report released Wednesday said.
Budget expenditures from July to November exceeded their 2002 level by 10 percent, though the amount of wages paid decreased by about 3 percent in that time compared to 2002, the report said.
“These figures appear to confirm allegations among public servants that they have not been properly paid recently,” the EIC report said.
“The result of this neglect can be predicted as a continued weakening of the commitment and efficacy of public servants.”
The consumer price index increased slightly more than
1 percent compared to last year, driven by an increase in the price of gasoline, according to the National Institute of Statistics at the Ministry of Planning.
The price of both food and housing increased in 2003, but much less than they increased in 2002.
“Decreasing growth in the housing price indicates more construction activity in the past three years,” Kang Chandararot, an economist at the Cambodia Development Resource Institute, said Wednesday. “That contributes to increasing the real income of households.”
Commenting on the slower growth of food prices, Kang Chandararot said: “The price of agricultural products should be more or less stable. That is good for both households and farmers.”
Inflation for 2003 was at
1.2 percent, down from 3.3 percent in 2002. More important to the economy has been the fall of the dollar’s value on global financial markets in the past year.
“A cheaper dollar would increase Cambodian exports,” Kang Chandararot said.
The garment industry, which accounts for about one-third of the country’s economic output and nearly all of its exports, shipped about $1.5 billion worth of goods out of the country, up from $1.33 billion in 2002.
Tourist arrivals in the first 11 months last year dropped by 15 percent compared to the same period in 2002, reflecting travel fears caused by SARS and the Iraq War.
“The political issues had no real effect on tourism,” Sok Hach said.
Since traditional economic indicators, such as inflation rate, production and a stock exchange, do not give a clear image of the country’s economic picture, economists often rely on foreign currency deposits to judge how much confidence investors have in the economy.
Foreign currency deposits remained constant through the first half of the year before dipping about 10 percent in July, when the national election was held, according to the EIC report.
Deposits quickly recovered after the election, however, posting an increase of about 11.5 percent for the year compared to 2002.
The average per capita income increased by less than 1 percent in 2003, to $281 per person, the EIC report said. The average salary in Phnom Penh last year was $1,016; in Sihanoukville, it was $592.
“Urban income vastly outstrips that of rural Cambodians,” the report said.
The economy’s two main industries—garments and tourism—will likely remain strong if the country’s accession into the World Trade Organization goes smoothly, Sok Hach said Wednesday.
On Tuesday, the government sent a letter to the WTO secretariat requesting a six-month extension beyond the March 31 deadline for the National Assembly to ratify membership in the global trade body.
Beyond garments and tourism, other industries are unlikely to emerge this year, Sok Hach said.
“In the longer run,” he said, “other industries might emerge because they are acquiring more professional assistance and forming stronger business associations that will be able to exert more and more power on the government.”
(Additional reporting by Lor Chandara)
