WB: Cambodia's economy to slow down due to COVID-19

A Cambodian vendor wearning mask - Photo: xinhua/VNA

After consecutively attaining an economic growth of 7.1 percent in recent years, the bank's East Asia and Pacific Economic Update said the outbreak caused sharp decelerations in most of Cambodia's main engines of growth in the first quarter of 2020, including weakened tourism and construction activity.

“Real growth is projected to slow sharply to 2.5 percent in 2020, but the growth rate will recover to 5.9 percent in 2021 under the baseline scenario,” said the report. It added that the unprecedented global shock triggered by the pandemic has significantly affected the country’s economy in all its major sectors: agriculture, tourism, garments, textiles and construction”.

The situation was not helped when the European Union said it will withdraw 20 percent of its free trade status with the country, hitting the country’s coffers by about 1.1 billion USD from August 12.

“In the worst case scenario, real growth is projected to diminish to 1 percent in 2020 and 3.9 percent in 2021,” according to the report.
“Spillovers to the construction and real estate sector – one of Cambodia’s growth drivers and heavily invested in by Chinese investors – amid financial market turmoil could potentially be detrimental to growth,” it said.

The report said rebounds in economic activity in China and major markets in 2021 will improve Cambodia’s growth outlook next year.

In the first two months of this year, foreign arrivals in Cambodia dropped by 15 percent. In 2019, the country welcomed 6.6 million tourists, a 6.6 percent increase from the year before. The sector generated approximately 5 billion USD and accounted for 12 percent of the country’s gross domestic product (GDP). Border restrictions and fear of infection have led many people globally to spend more time and even work from home.