Cambodia’s economic growth for 2022 is expected to decelerate to 4.9 percent from estimates of 5.4 percent made prior to the war in Ukraine, an assessment by the UN Development Programme (UNDP) stated.
The new forecast takes into account the “positive effect that social protection and other mitigation measures have on the economy”.
The assessment, based on the findings from a computable general equilibrium (CGE) model, also showed that the poverty rate is projected slightly higher at 15.2 percent as opposed to pre-war estimates of 15 percent. However, it is 0.5 percentage points lower than the projection with no social interventions.
The poverty rate translates to the prevention of around 85,000 people from falling back into poverty.
“Due to the contraction of the economy, the model estimates 1.25 percent of unemployment in 2022 as compared to 1.12 percent in the pre-war estimation. The unemployment rate may increase to 1.45 percent without social protection measures,” UNDP said.
The assessment is part of the UNDP policy brief “2022 Economic and Social Impact Assessment of COVID-19 and War in Ukraine on Cambodia”, which was jointly launched with Ministry of Economy and Finance (MEF), Ministry of Social Affairs, Veterans and Youth Rehabilitation (MoSVY) and the UN Joint SDG Fund today.
The CGE model is input with real economic data to simulate shocks and examine the reaction of the economy, considering the impact of rising fuel, food and fertiliser prices, in addition to the global economic slowdown and its impact on demand for Cambodian exports, the tourism sector and construction sector investments.
UNDP Cambodia resident representative Alissar Chaker said although the country is recovering from the pandemic, recovery is slowed down by uncertainties driven largely by external shocks.
Her policy recommendations highlight the need to “focus on building the socio-economic resilience of the country and enhancing its preparedness for absorbing future shocks”.
“This includes doubling down on investments in human development, optimising and expanding social protection, fostering a just energy transition and green economy, managing energy security, and accelerating an inclusive and whole-of-society digital transformation,” UNDP said.
Meanwhile, Tep Phiyorin, MEF undersecretary of state, said the CGE model served as important policy input to support the government in formulating responses to overcome the impacts of the pandemic and additional shocks that the country is now facing.
“The government has prioritised the people’s well-being as the first priority in the 2023’s budget,” he added.
Similarly, Samheng Boros, Minister attached to the Prime Minister and Secretary of State at MoSVY, said the model clearly shows that social protection measures have a central role to play in protecting the economy and its people from “unforeseen challenges like the Covid-19 pandemic and war in Ukraine”.
The UNDP is supporting the delivery of a training programme on modelling tools, including CGE, to professional economists at MEF.
“This will support the development of institutional and individual capacities and systems to produce traditional and innovative data, as well as to strengthen reporting mechanisms.
“With this data, up-to-date information can be provided to planners and policymakers to advance integrated development solutions that accelerate the achievement of the Sustainable Development Goals and Cambodia’s development ambitions,” UNDP said.