The World Bank in its May 2023 Economic Update on Cambodia said that weakening external demand is affecting the country’s recovery.
Global growth is slowing sharply in the face of elevated inflation, higher interest rates, reduced investment, and disruptions caused by Russia’s invasion of Ukraine. Attributable largely for the decline in exports to the U.S. and EU markets, total goods exports contracted at 14.2 percent y/y during the first two months of 2023, compared to an average growth rate of 6.7 percent in 2019.
Of the 14.5 percent decline, garment exports contributed the largest, accounting for 11.8 percentage points. Approved foreign direct investment (FDI)-financed project value also shrank to $156 million, contracting at 92.3 percent during the first two months of 2023. Of the total $156 million, $83 million (60 percent) went to the garment industry, while the remaining $73 million (40 percent) financed the travel goods, footwear, and packaging industries.
Despite weakening goods export performance, the current account balance is improving, thanks to the rebound in the travel and tourism industry and remittances, while the oil price shock eased.
In 2022, the current account deficit improved to an estimated 26.3 percent of gross domestic product (GDP), as the trade deficit narrowed, thanks to strong exports. The current account balance continued to be mainly financed by capital inflows and international reserves.
Gross international reserves, therefore, declined to $17.7 billion, covering about seven months of imports in February 2023, down from $20.3 billion during the same period in 2022.
Source : Khmer Times