Yearender: Cambodia's economy weathers storm of political uncertainty

by Mao Pengfei, Nguon Sovan

PHNOM PENH, Dec. 20 (Xinhua) -- Cambodia's economy is expected to remain strong in the short-to-mid term despite political concerns, senior officials said, although analysts foresaw current political issues as possibly adversely affecting growth prospects.

Economy and Finance Minister Aun Pornmoniroth said Cambodia would still be able to achieve economic growth of around 7 percent per annum in the short-to-medium term.

"Based on the forecast, economic growth is projected to grow 6.9 percent in 2018, the same as 2017, pushing up the nation's GDP (gross domestic product) to about 24.5 billion U.S. dollars," he told parliament during a budget law debate in November.

He said the GDP per capita was predicted to be 1,568 U.S. dollars in 2018, an expected rise of 9 percent from 1,435 U.S. dollars in 2017.

The Southeast Asian country's economy has traditionally been driven by garment exports, tourism, construction, and agriculture.

GROWTH DRIVERS

According to government figures, the country exported garments and footwear products worth 5.6 billion U.S. dollars in the first nine months of 2017, up 7 percent compared to the same period a year earlier. As for tourism, 4.3 million foreign visitors came to Cambodia during the first 10 months of the year, up 10 percent on year.

On the construction side, the country attracted 6.2 billion U.S. dollars in investment projects during the first 10 months of the year, up 27 percent on year.

Last month, the World Bank also predicted strong growth for Cambodia in the medium term, saying the country's economy was expected to increase 6.8 percent in 2017 and by 6.9 percent in 2018 despite risks including uncertainties related to next year's national election.

"The medium-term outlook remains positive, boosted by export diversification and underpinned by healthy inflows of foreign direct investment and an improving global outlook," the World Bank said in its updated report, adding that "potential election-related uncertainties pose downside risks to the outlook."

POLITICAL TURBULENCE

On Nov. 16, the country's Supreme Court dissolved the main opposition Cambodia National Rescue Party (CNRP) after its leader Kem Sokha was arrested on Sept. 3 and charged with treason for conspiring with a foreign power to attempt to overthrow the government.

The court also banned the CNRP's 118 senior members from politics for five years.

Chheang Vannarith, a senior fellow of the Cambodian Institute for Cooperation and Peace, said the current political situation would adversely affect the nation's economic outlook.

"The dissolution of the CNRP will lead to a deeper political crisis and instability in the country," he said. "Cambodia will face high risks and uncertainties within the context of looming international sanctions to be imposed by the United States and the European Union."

Mey Kalyan, a senior advisor to the Supreme National Economic Council, said the political situation might have an adverse effect on the economy, but only in the short-term.

"In the case of Cambodia's current situation where the national election will take place next year, it is likely that there will be some negative impacts in the short term, as many people will take a 'wait and see' attitude," he said.

"This is very normal in other countries too. However, in the medium-to-long run, the impact could turn positive as the cloud of uncertainty will have cleared."

BUSINESS AS USUAL

Sok Eysan, a spokesperson for the ruling Cambodian People's Party, said legal measures against the opposition party and its leaders were to enforce the rule of law and to maintain the country's peace and stability.

"I don't think the legal measures against the law-violating opposition group will lead to instability," he said. "As you see everything is moving forward as usual -- investors and tourists are still coming to Cambodia."

In Channy, president and chief executive officer of Acleda Bank, agreed that the current political situation would not hurt economic growth thanks to investors' confidence in the country's political stability.

"As a banker, I do not see any signs that the growth will slow down," he said. "I believe that foreign investors will continue to come to Cambodia because of their confidence in political stability here and the high potential for investment." Enditem