According to ADB's Asian Development Outlook 2009 Update (ADO 2009 Update) a sharper than expected downturn in clothing exports, construction activity, and tourism arrivals has prompted a downward revision in the GDP forecast for Cambodia. The economy is now expected to contract by 1.5 percent in 2009, rather than record slight growth as anticipated in ADO 2009.
The report, which revised the GDP growth forecasts for countries in Asia, also quoted U.S. Department of Commerce data which shows that Cambodian clothing exports to the U.S. dropped by 27 percent in the first five months of 2009 from the corresponding period of 2008. Order books for clothing in May were significantly lower than a year earlier. Tourist arrivals fell by 3 percent in the first four months of 2009. The decline in construction activity was a consequence of falling FDI, notably from South Korea.
Meanwhile, ADB report said that growth is projected to resume in 2010 at about 3.5 percent, as a gradual recovery in the global economy stimulates clothing exports and tourism. That should provide support for growth in incomes and consumption.
Slowdown in Inflation
Inflation has decelerated faster than expected, owing to lower international oil and food prices and weaker domestic demand as the economy contracts. The inflation rate for 2009 is now forecast at just 0.8 percent, revised down from ADO 2009. It is expected to quicken to about 5 percent in 2010, reflecting higher prices for imported oil and the improvement in domestic demand.
External Accounts
Imports fell by 18.1 percent in the first half of 2009, a sharper decline than that recorded for exports (10.3 percent). Tourism arrivals are expected to pick up in the second half of 2009 and the rate of decline in exports may well slow.
The current account deficit will be narrower than forecast in March, at about 5.0 percent of GDP this year and 7.0 percent in 2010. Gross international reserves edged up to 2.18 billion U.S. dollars at mid-year, from 2.16 billion U.S. dollars at end-2008.
A gradual recovery of the global economy and increased trade flows will impart some growth momentum for Cambodia.
