Amret Microfinance Institution - Cambodia Economic Performance

Cambodia Economic Performance

With stabilized political environment, Cambodia has remained robust economic growth of exceeding 7% annually recent years which moves Cambodia closer to lower middle-income country. This economic growth rate is expected to continue in medium term, driven by resilient garment exports, a rebound in construction activity, a robust tourism sector, agriculture sector growth, and the development of the banking sector. Rising foreign direct investment played an increasingly important role in industrial development especially garments, tourism, construction, and rice sector.

Besides 7% economic growth in 2014, inflation rose at a manageable pace of 3.5% in 2014, thanks to a slight increase in food and recent decrease in gasoline prices. A stable exchange rate also contributed to Cambodia’s steady economic growth in 2014. The Khmer riel appreciated, reaching in average 4,050 per US dollar during 2014. The fast development of the banking sector, resulting from significant growth of credit and deposit and new entries into the market, was reflected in increasing public confidence in the sector and in private sector investment, which contributed strongly to the growth of the trade and service sector and thereby of the domestic economy. At the same time, competition among banks and MFIs has made loan interest rate in downward trend which incited local investors’ interest in the domestic economy. This development was greatly favorable to the small and medium enterprise industry, which is in the process of developing in advance of the Association of Southeast Asian Nations (ASEAN) economic integration in 2015.

Despite sustained agricultural growth, the real growth was largely influenced by the garment, construction and tourism sectors. Garment exports continued to see impressive expansion in the US and EU markets resulting from US economic recovery in 2014. Investment approval in construction rose quickly, mainly for housing and public infrastructure construction projects. Tourist arrivals increased remarkably, which allowed the trade, transportation, hotel and restaurant sub-sectors continued growth and contributed to real growth in 2014.

Despite robust growth, the economic outlook is subject to external downside risks due to slower growth in China and Asean economy, which may affect Foreign Direct Investment (FDI) into the country. Positively, improving electricity and rural infrastructures as well as more diversified FDI and a renewed reform momentum will mitigate external risk and provide a further boost to growth. Cambodian economy is predicted to further stable grow 7% in 2015, pushing GDP per capita to USD 1,237 in 2015.