Despite earlier gloomy predictions, the International Monetary Fund now predicts strong economic growth in Cambodia in 2005 as the end of the worldwide garment quota system will apparently have almost no impact on Cambodia this year, a senior IMF official said.
Li Houng Lee, an IMF deputy director for Asia, announced Tuesday that the IMF now predicts Cambodia’s gross domestic product will grow at 6 percent in 2005, up from the 2.3 percent GDP predicted late last year.
“The main contribution to the revision is garment exports,” Lee said at a news conference in Phnom Penh.
“Recent developments in the markets have given Cambodia actually some breathing space which it can use to improve its competitiveness,” he said, adding that the IMF also forecasts 6 percent growth in 2006.
Lee also said that an unanticipated construction boom in Cambodia and a less severe drought than feared had also contributed to the higher growth estimate.
Last month, the US imposed a ceiling of 7.5 percent growth on some Chinese garments entering the US market, and last week China and the EU agreed to cap garment export growth at around 12.5 percent for some garments.
The limitations on Chinese exports are apparently encouraging Cambodia’s garment industry to stabilize and expand.
“Five to 6 percent growth is plausible,” said economist Sok Hach, whose Economic Institute of Cambodia in April had predicted 3.2 percent growth in 2005. Sok Hach said he was more optimistic now.
“We had predicted no growth in the garment industry, but 10 to 20 percent growth now seems likely.”
In the first quarter of 2005, despite surges of garment exports from China onto world markets, Cambodia still managed to export 16 percent more than in the first quarter of 2004, according to Ministry of Commerce data.
But Kang Chandararot of the Cambodian Institute for Development Study said he was less optimistic about the IMF’s growth prediction.
“I don’t think that the situation in the international garment trade can remain even through this year,” he said.