Amid strong domestic demand, moderate inflation and continuing improvements in trade, the ASEAN+3 region – encompassing the 10 bloc members and China, Japan and South Korea – is expected to maintain robust economic growth this year despite uncertainties in the global outlook.

The Singapore-based ASEAN+3 Macroeconomic Research Office (AMRO) has projected a growth forecast of 4.5% for the ASEAN+3 region in its January quarterly update of the ASEAN+3 Regional Economic Outlook (AREO), released last week.

The report also projected that Cambodia’s economy will grow to 6.2% this year, a significant increase from 5.3% in 2023. Cambodia’s inflation rate is expected to rise from 2.6% in 2023 to 3.1% this year. 

It noted that price pressures are continuing to recede across member economies, reflecting the trend in global commodity prices. 

It said 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% for 2023. 

However, it also highlighted that there are still significant upside risks to inflation, and core inflation remains high in many economies.

“The recovery in the global tech cycle is starting to be felt in the region’s export performance, especially for electronics,” stated AMRO chief economist Hoe Ee Khor. 

“But non-tech exports are lagging behind in terms of recovery, which is why recent manufacturing sentiment surveys are relatively mixed,” he said.

“Spiking global commodity prices remain a key risk to growth, but there are several other wildcards. We still cannot rule out a US recession, for one. The lead-up to the US election in late 2024 could also exacerbate policy uncertainty and volatility in financial markets,” Khor cautioned. 

The Ministry of Economy and Finance projected in December that Cambodia’s economy would grow at 6.6% in 2024, boosting its gross domestic product (GDP) to approximately 142.96 trillion riel (roughly $34.52 billion). 

It also predicted that GDP per capita would reach $2,071, an increase from $1,917 in 2023.

The forecast indicated that the positive growth trajectory is primarily driven by key economic sectors. 

According to the ministry, the industrial sector, buoyed by the anticipated revival of the garment sub-sector, is expected to surge by around 8.5%, up from 5% growth in 2023. 

Non-garment manufacturing is expected to remain robust, although the construction sector may lag.

It said the service sector is anticipated to grow by 6.9% in 2024, building on the 8.1% growth in 2023, driven by domestic recovery, especially in the hotel and restaurant industries, which in turn benefits related sectors such as wholesale-retail and transport.

The agricultural sector is expected to see a growth of 1.1% in 2024, a slight increase from 0.9% in 2023, with the crop and fisheries sub-sectors driving the growth, while the livestock sector remains stable, as per the ministry.

In October, the International Monetary Fund (IMF) projected the country’s economy to grow by 6.0% in 2024. 

Davide Furceri, IMF’s mission chief to Cambodia, stated during an October press conference that the downgrade was partly due to a sluggish real estate sector. 

He said the slowdown has been influenced by a deceleration in major exporting partners such as the US, EU and China. 

Furceri emphasised that despite domestic and international challenges, the country’s economy is steadily recovering from the pandemic. 

“The ongoing recovery in tourism and the surging exports of solar panels and electrical components are the main growth drivers,” he said.

However, he noted that garment exports remain weak, showing only modest signs of recovery in recent months, while slower construction activity is also impacting growth.

Aaditya Mattoo, chief economist for the East Asia and Pacific Region at the World Bank, highlighted the prospective benefits of the Regional Comprehensive Economic Partnership (RCEP) for Cambodia. 

He pointed out that the trade agreement could enhance market access predictability and stimulate policy reforms, potentially leading to increased trade and investment flows.

He suggested that this could assist the country in diversifying its economy, which currently depends heavily on the garment industry. 

“I’m pleased to see Cambodia venturing into the electronics sector,” he said. 

“However, Cambodia must strengthen its fundamentals, particularly in skills and connectivity. These are areas that can be reformed domestically without the need for trade agreements,” he added.

The World Bank has projected Cambodia’s economy to grow at 6.1% this year.