Economic Growth to Increase to 5.2 percent in 2023

The World Bank has projected Cambodia’s economic growth will increase to 5.2 percent in 2023, aided by rising domestic consumption but slowed by slowing global trade growth
A woman sleeps on her coffee motorbike in Phnom Penh, September 20, 2022. Kiripost/Siv Channa
A woman sleeps on her coffee motorbike in Phnom Penh, September 20, 2022. Kiripost/Siv Channa

Cambodia’s economy is forecast to increase to 5.2 percent in 2023 due to growing domestic consumption, however, it continues to face major challenges due to the global outlook, according to the World Bank.

According to a World Bank report on Cambodia's economy released on December 7, the country's economy is rebounding from the slowdown brought on by Covid-19 and boosted by resilient exports. The slowing of global trade growth, however, has adverse effects on the nation's economy.

Despite the rebound, it stated that the actual growth forecast for 2023 has been revised downward to 5.2 percent due to the projected slowdown in global trade, particularly in the United States and China. Both the export market and the source of foreign direct investment into Cambodia are located there.

The World Bank had upped its protection for Cambodia’s real GDP growth to 4.8 percent in 2022, on the back of the broader economic recovery. Garment, travel goods, and footwear exports remain notably buoyant. Earnings from services, especially travel and tourism, have also improved following the introduction of the “living with Covid-19” strategy late last year.

However, data shows that during the Covid-19 pandemic, more than 60 percent of Cambodian households, and about 90 percent of poor households, reduced their food consumption.

Moreover, the national school dropout rate increased in 2019 and 2020, reversing years of declining trends, and about 14 percent of poor children aged six to 17 dropped out in early 2022.

“Inflation is rising in Cambodia, as elsewhere, and is particularly harmful to poor households, some of whom are forced to reduce food consumption and withdraw children from school,” it said. “This could have long-term effects on human capital, causing losses in worker productivity and welfare, and disparities in income.”

It added that current inflation could increase poverty substantially. Expanding social protection services strategically and temporarily, particularly through cash transfers, will significantly reduce poverty and protect the poor and vulnerable.

Mariam Sherman, World Bank Country Director for Myanmar, Cambodia, and Lao PDR, said Cambodia could take steps to strengthen its fiscal position and promote its domestic economy, particularly its globally attractive tourism industry, in order to shield its economy from a possible drop in external demand.

“Revenues are up, thanks to the economic recovery and administration improvements,” she said. “Broadening the tax base will help ensure the resources needed to promote Cambodia’s economy and weather slowing growth among major trading partners. Tourism and hospitality are particularly promising areas for growth.”

Keo Ouly, IDPoor Director, Ministry of Planning, said that the Ministry has established a team to assist poor and vulnerable families affected by the Covid-19 pandemic. Prior to the request, the Ministry practiced every three years but changed to practice on a regular basis.

“So, those who are affected. [If] they don’t have poor ID cards or equity cards, they can apply,” he said. “This is a part of the government's assistance program for vulnerable families.”