Cambodia

Population
14,7(millions)

GDP
9574(US$million)

Rating country

Business climate rating

MAJOR MACRO ECONOMIC INDICATORS

2007 Economic growth (%) Public sector balance (%GDP) Current account balance (%GDP) Foreign debt (%GDP) Foreign exchange reserves (in months of imports) (e) Estimate (f) Forecast 10.2 -2.9 -8.1 29.6 2.5 2008 6.7 -2.8 -15.4 24.6 4.0 2009(e) -2.5 -6.7 -10.5 29.1 3.5 2010(f) 4.7 -5.8 -16.0 30.1 3.1

STRENGTHS
Flexible textile industry and high potential tourism sector Support of bilateral and multilateral donors Political stability since 1997

WEAKNESSES
Narrow base of growth with the large role played by agriculture making consumption dependent on weather conditions Dependence on concessional loans as a result of the countrys limited fiscal revenues and high public foreign debt Major governance shortcomings

RISK ASSESSMENT
Recession in 2009 but gradual recovery in 2010 Cambodia has been affected by the contraction of textile exports (over 70% of sales abroad), especially to the United States (market for 60% of exports). Tourism decelerated moreover amid the slowdowns in industrialised and Asian economies. And the construction sector has suffered from the drop in investments by South Korean companies in a context of tightening credit conditions. Although harvests have been satisfactory, farm incomes declined due to the fall of raw material prices, affecting household consumption in consequence. Growth is expected to rebound in 2010, spurred by the recovery in tourism and the productivity gains in agriculture. Performance could improve in the construction sector thanks to the recovery of FDI and the broader access to credit than in 2009. Although textiles could begin to grow again with the United States economy growing gradually stronger, the sector's competitiveness remains more constrained by lower productivity than in neighbouring Vietnam due to high electricity and transport costs attributable to a lack of investment in infrastructure.

In the financial sphere, dependence on international financial backers The fiscal deficit widened significantly in 2009 as a result of the increased spending intended to support the economy (wage increases in the public sector public, capital investments), but it could gradually narrow in 2010 in a context of economic recovery. Public sector finances remain very dependent on official transfer payments. The current account deficit declined in 2009 as a result of the more rapid contraction of imports, attributable to the fall of raw material prices and

the slowdown of domestic demand compared to exports. But the deficit could grow again in 2010 as a result of the stronger recovery expected in imports than in exports with Cambodia remaining very dependent on imports of capital goods and raw materials. Cambodia's growing external deficit will be covered by foreign direct investment and concessional aid. Donors have manifested their concern, however, over the lack of progress in improving the business environment and especially in combating corruption, which has reached disquieting levels with the concentration of power around the prime minister.

Political stability The domestic political situation has been stable. The Cambodian People's Party led by Prime Minister Hun Sen won two-thirds of the seats in the National Assembly in the July 2008 elections and strengthened its position in the regional elections last May winning 75% of the votes cast. Economic and social policy continuity thus appears likely to remain on track. Although relations with Thailand have deteriorated over the question of the border demarcation near the Preah Vihear Temple, the risk of armed conflict remains nonetheless low despite the troops stationed at the border by the two countries.