Phnom Penh:Cambodia's robust manufacturing exports, particularly in non-garment merchandise, are helping to balance a sluggish service sector, according to the Chief Economist of the ASEAN+3 Macroeconomic Research Office (AMRO).
According to Agence Kampuchea Presse, Mr. Dong He, AMRO's Chief Economist, highlighted at a Singapore news conference that Cambodia's industrial growth is being driven by both garment and non-garment manufacturing. He noted that garment exports and fabric imports grew by 6.7 percent and 8.2 percent, respectively, year-on-year in the first eight months of the year. Remarkably, non-garment manufacturing exports surged by 37.3 percent in the same period, outpacing the previous year's growth rate of 16.8 percent.
AMRO has adjusted Cambodia's growth forecast for this year from 4.2 percent to 3.9 percent, primarily due to a slow recovery in the service sector, with tourism and real estate remaining particularly weak. Mr. He emphasized the need for the government to address reputational concerns and economic outlook challenges to support sector recovery. Additionally, he stressed the importance of managing high non-performing loans in the financial system to maintain confidence.
Cambodia aims to achieve upper middle-income status by 2030, a goal deemed significant by Mr. He, who also called for continued structural reforms to diversify and strengthen the economy. He believes that increasing local value from manufacturing-related exports and addressing service-sector issues would contribute to sustainable growth.
AMRO's economic outlook update maintains Cambodia's growth forecast for 2027 at 4.9 percent, with inflation expected to reach 4.9 percent, down from a previous estimate of 5.1 percent. The government has been praised for effectively managing global energy shock challenges. Inflation is projected to decrease to 3.0 percent in 2027, slightly higher than the earlier forecast of 2.8 percent.
In response to questions, AMRO stated that despite the high levels of non-performing loans and recent bank liquidations, risks to financial stability are limited. The banking sector's capital and liquidity ratios exceed regulatory requirements, providing protection against potential losses, with substantial provisions set aside for credit losses.
The International Monetary Fund's recent assessment echoed this sentiment, indicating that systemic risks in Cambodia remain contained despite financial vulnerabilities. In related news, the National Bank of Cambodia dismissed rumors on social media about potential difficulties in the banking sector as baseless and misleading.