Cambodia Economic Update May 2019

Key findings

• Preliminary estimates for Cambodia show real growth achieved a four-year high of 7.5% in 2018, compared to 7.0% in 2017.
• The economy performed better than expected, driven primarily by rapid expansion of exports and robust internal demand, as well as a surge in Foreign Direct Investment.
• With better-than-expected export performance, the growth outlook has been revised upward, compared to earlier projections.
• However, heightened trade uncertainty has also intensified risks.
• Downside risks are erosion of export competitiveness, a potential slowdown in China, and an overextended financial sector, associated with banks’ exposure to construction and real estate.
• Cutting production and trade costs could help to mitigate the impact of Everything But Arms (EBA) suspension.
• Further macroprudential measures could be considered, such as limiting bank exposure to construction and real estate to reduce risks.

Special topic: human capital

• Poor childhood health and nutrition is a driver of Cambodia’s gaps in human capital.
• Child nutrition outcomes have steadily improved steadily since 1990s, yet levels of stunting and wasting among children under five remain high, with large disparities for socioeconomically and geographically marginalized populations.
• Key drivers of undernutrition in Cambodia include: poor maternal, infant, and young child nutrition behaviors; low access and affordability of nutritious diets; low availability and quality of nutrition services; low access to and quality of water supply and sanitation; and varied access to childcare resources, especially for working women.
• Cambodia’s financing transition for nutrition is already well underway. The amount of spending on nutrition is insufficient relative to the needs for health and other relevant sectors. However, opportunities exist to reprioritize nutrition within existing budgets.
• A comprehensive human capital strategy is necessary that includes long-term investments in early childhood health and nutrition alongside short-term measures in skills-building and higher education.
• Special attention is needed to nutrition, health care, social protection, and labor protection for working mothers and their families to mitigate unforeseen child care tradeoffs for Cambodia’s large female labor force.

Source: The World Bank