Severe acute respiratory syndrome and fears of terrorism led to a slowdown in economic growth in the first half of 2003, Finance Minister Keat Chhon told donor institutions Wednesday.
The Ministry of Finance estimated national income growth for 2003 would be 4.7 percent, down from 5.5 percent growth last year. In the first five months of 2003, the riel depreciated, eventually stabilizing at about 4,000 riel per dollar.
“Indeed, sluggish growth during the first half of 2003, coupled with some political ambiguity due to the disturbances in late January, as well as growing focus on the upcoming elections has constrained revenue collection,” Keat Chhon said. “Unavoidably, the preparations for the elections have driven up spending even as the Royal Government has established mechanisms for expenditure control.”
Expenditures rose by 19 percent in the first five months of 2003, the Finance Ministry reported. Since 2000, Keat Chhon said, there has been some overspending due to the government’s efforts to rebuild roads, bridges, schools and hospitals as part of implementing the government’s poverty-reduction programs.
“Cash shortages have become severe during the first half of 2003,” Keat Chhon said.
The government has had difficulty collecting tax revenue and controlling inflation, Keat Chhon said, but it has controlled the macroeconomy and the political environment very well.
“If there is stability of macroeconomy, there will also be political stability,” Keat Chhon said.
Domestic revenue in the first five months of 2003 rose 4 percent compared with the same period in 2002. Tax revenue climbed 6 percent due to a 19 percent growth in excise taxes and a moderate increase in customs duties.
In the past five years, revenue from garment quota auctions and garment quota management fees totaled $100 million. In 2003, visa collections increased by 13 percent and new entry fees into the Angkor temple complex increased revenue by 14 percent.
“More actions are required to further improve tax collections and enforcement, combat smuggling, increase ownership of the reform programs and increase transparency of signed contracts,” Keat Chhon said.