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NEWS

World Bank Says Cambodia’s Economy Recovering But Uncertainties Remain

Cambodia, with its strong appreciation potential and high rental yields exceeding 6%, is arguably the best place to buy real estate in Southeast Asia right now. Property developers in Cambodia meet a truly global standard as well.

According to the World Bank’s latest Economic Update for Cambodia, while some sectors have seen economic gains, others continue to be stifled by the ongoing pandemic. Agriculture has been relatively resilient, due to strong demand that has been boosted in part by the newly signed Cambodia-China Free Trade Agreement. The manufacturing sector has gradually recovered by adapting to changing external conditions and wholesale and retail businesses have also experienced a slow recovery, supported by a gradual revival in domestic economic activity. On the other hand, parts of the services sector – such as accommodation, restaurants, and transport – continue to be hit hard by the slowdown in domestic and international tourism. Foreign Direct Investment inflows remain resilient and are helping sustain the external sector.

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Cambodia’s growth outlook remains highly uncertain, with the shape and pace of recovery largely dependent on the course of the virus and the speed at which vaccines can be rolled out. The report also offers a downside scenario, under which the risk of a slow vaccination programme is accompanied by frequent, prolonged, and nationwide lockdowns. Under this scenario, the economy is projected to grow by just 1 percent in 2021.

The report recommends that Cambodia take immediate steps to shore up market confidence by urgently accelerating its vaccination programme, while simultaneously continuing to take measures to contain infections. Given the country’s relatively wide fiscal space, the government can support relief, recovery, and growth by improving the business and investment climate, providing social assistance programmes, and boosting public investment and pro-poor growth. To maintain financial sector stability, it also important for the authorities to closely monitor vulnerabilities that can arise from a prolonged property boom and increased credit provided to the construction sector.

“Like many countries in the region, Cambodia has been hit hard by the global demand shock brought on by COVID-19. But the good news is that Cambodia has now vaccinated more than 3 million people, one of the highest rates in the region,” said Ms. Inguna Dobraja, World Bank Country Manager for Cambodia. “The World Bank is working with Cambodia to provide further support to combat the pandemic and help the country’s resilient economic and social recovery.”

The report includes a special issue looking at lessons learned from Cambodia’s relatively swift introduction, expansion, and deepening of social assistance programs – in particular its cash transfer program. The cash transfer scheme was introduced in June 2020 and by February 2021, more than 688,000 poor families had received a cash transfer from the government – representing 19.5 percent of all households.