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Cambodian recovery likely to continue, inflation may peak in 2022: IMF

23 Sep '22
2 min read
Pic: Shutterstock
Pic: Shutterstock

Despite fresh pressures, economic recovery in Cambodia is projected to continue and real gross domestic product (GDP) growth is forecast to be 5 per cent this year after the strong export performance earlier in the year, and nearly 5.5 per cent in 2023, dampened by external pressures and the impact of rising prices on real disposal income, according to the International Monetary Fund (IMF).

Inflation is expected to peak this year, be lower in 2023, and decline further thereafter, assuming it remains mostly confined to imported goods, IMF said after one of its teams led by Alasdair Scott recently held meetings with Cambodian authorities for the 2022 Article IV consultation September 7-20, 2022.

Inflation hit 7.8 per cent year on year in June this year, following significant increases in fuel and fertiliser costs, although it receded to 4.9 per cent in August. Export orders for the second half of the year have weakened, and the real estate market is slowing, Scott said in an official statement.

“GDP growth rebounded in the second half of 2021, driven mainly by exports of goods. But this year the economy has been buffeted by developments in China, the slowdown in consumer demand in advanced countries—the US and Europe are significant markets for Cambodian manufactures—and tighter global financial conditions,” he said.

“The public finances are expected to gradually improve. Spending pressures and lower-than-expected tax revenue resulted in a fiscal deficit of just over 7 per cent of GDP in 2021. The deficit is expected to narrow to just over 4 per cent of GDP in 2022 with a strong bounce-back in revenues, widen somewhat in 2023, and decrease further thereafter,” he said.

Public debt-carrying capacity remains vulnerable to further shocks to exports and growth, but risks of external and overall debt distress remain low, so long as public debt is constrained in the future and the increase in private debt is not associated with an increase in contingent liabilities of the sovereign, Scott said.

“Uncertainty around the outlook is particularly high, and risks are tilted to the downside. The most pressing risks are from rising private debt; conditions in key large economies; and inflation,” he added.

Fibre2Fashion News Desk (DS)

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