Central bank governor Chea Serey addresses a promotional programme on Cambodia's national currency, the riel, in Kampong Thom province in June 2023. NBC
The Cambodian economy still confronts numerous external factors and uncertainties, including geopolitical tensions and the risk of global political fragmentation, which could lead to a decline in international trade, investment flows and tourism and create uncertainty in international financial markets, according to the National Bank of Cambodia (NBC).
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NBC governor Chea Serey made the remarks at the closing ceremony of the central bank’s annual meeting, held to review its past achievements and set goals for 2024, last weekend.
She said the global economy in 2024 continues to be fraught with unknowns, noting that this is due to the anticipated stabilisation of financial policy in major developed countries following the achievement of target inflation levels.
“Capital flows may fluctuate with the pace of monetary policy normalisation and may lead to uncertainty over investment flows and exchange rate pressures. In this situation, the Cambodian economy may continue to face high external risks,” she said.
The Singapore-based ASEAN+3 Macroeconomic Research Office (AMRO) projected that Cambodia’s economy would grow by 6.2% this year, a significant increase from 5.3% in 2023. The inflationary rate is expected to rise from 2.6% in 2023 to 3.1% this year.
The group observed that price pressures are diminishing across ASEAN member economies, reflecting the trend in global commodity prices. Inflation in the ASEAN+3 region, excluding Laos and Myanmar, is forecast to moderate to 2.6% this year, down from an estimated 2.8% in 2023.
The report stated that upside risks to inflation remain notable, however, and core inflation continues to be high in many economies.
“The recovery in the global tech cycle is beginning to influence the region’s export performance, particularly in electronics,” said AMRO chief economist Hoe Ee Khor.
“However, non-tech exports are trailing in terms of recovery, which explains why recent manufacturing sentiment surveys have been somewhat mixed,” he added.
“Spiking global commodity prices remain the primary risk to growth, but there are other significant uncertainties. The possibility of a US recession can't be discounted,” Khor warned.
“The lead-up to the US election in late 2024 might also amplify policy uncertainty and volatility in financial markets,” he continued.
Serey pointed out internal risks, such as the sluggish recovery of the construction sector and declining demand in the real estate sector.
She said this was mainly due to the real estate crisis and the slowing economic growth in China, a key investor in Cambodia, and believes that reduced foreign investment inflows into the real estate sector will likely lead to a decrease in revenue sources, affecting domestic demand.
The central bank chief noted that although tourist numbers have increased, the average spending of visitors is estimated to be lower than before the Covid-19 crisis because most international guests are entering by land from neighbouring countries, typically for shorter stays.
“If the number of tourists arriving in Cambodia by air continues to increase slowly, it will maintain pressure on sectors that rely on these travellers, particularly the hotel and restaurant sector and the souvenir business. Over the past two years, the rate of non-performing loans [NPLs] has risen, due to the aftermath of the Covid-19 crisis and the slowdown in credit growth,” she emphasised.
“Despite these challenges, the Cambodian economy is optimally projected to grow at around 6.4% in 2024. This is largely supported by the ongoing growth of the services sector, especially tourism, and the recovery of the manufacturing sector. However, agriculture, construction and real estate are expected to experience low [expansion],” she added.
Serey stated that in support of the government's policy of strengthening growth and maintaining macroeconomic stability, the NBC will continue to implement prudent monetary policy.
She said this includes bolstering the development of the banking system, improving the efficiency, security and integration of the country’s payment system and launching necessary proactive policies and supportive measures in line with the economic situation and policies of the government.
