The Asian Development Bank (ADB) is predicting a steady uptick in Cambodia’s economic growth to 7.3 percent and 7.5 percent in 2015 and 2016, respectively, on the strength of improved performance in the country’s trade partners and a tempered political environment at home.
The forecast is part of the Asian Development Outlook 2015, which the bank launched Tuesday and shows Cambodia continuing to outpace most of Asia and recovering from a slight dip to 7 percent growth in its gross domestic product (GDP) in 2014.
The ADB blames last year’s dip —down from an average growth rate of 7.2 percent over the previous three years—on political and labor unrest that dented both investor confidence and tourist arrivals, and on floods and droughts curbing agriculture.
The ADB says Cambodia will also benefit this year and next from robust domestic demand, a shrinking fiscal deficit, replenishing bank deposits and an improving—if still deeply negative—trade deficit. The bank also expects agricultural output to pick up modestly.
As for Cambodia’s prospects beyond 2016, the ADB said the economy would likely continue to slowly diversify its relatively narrow economic base—perhaps most importantly into light manufacturing—and integrate into regional and global supply chains.
The ADB Outlook urges Cambodia to do more to build up its infrastructure, improve the skills of its labor force and raise the incentives for foreign investment. It says the country’s special economic zones have helped to lure investors but shown little evidence that the firms they house are significantly outperforming the firms operating outside them.
The arrival of the Asean Economic Community at the end of this year has caused jitters about Cambodia’s ability to compete as trade barriers within the region begin to fall.