AMRO: Faster Vaccination and Continued Fiscal Stimulus Keys to Economic Recovery

• 6 May 2021
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The ASEAN+3 Macroeconomic Research Office (AMRO) has recommended Cambodia speed up vaccinations and continue providing more targeted and flexible policy measures to achieve economic growth in the upcoming years.

This suggestion came after the preliminary assessment by AMRO during its virtual Annual Consultation with the Cambodian authorities from 19 April to 4 May 2021.

AMRO forecast that the Cambodian economy is projected to grow by 4% in 2021, led by a robust recovery in manufacturing and supported by continued fiscal stimulus.

However, this macroeconomic research organisation also warned Cambodia of possible risks caused by the recent surge in community cases and lockdown.

“In particular, its high reliance on contact intensive services sector and a labour-intensive manufacturing sector renders the economic recovery more vulnerable to new waves of infection, given a relatively weak public health system,” said AMRO.

“On the financial front, risks may stem from a possible deterioration of asset quality. Despite the active loan restructuring, a protracted and uneven economic recovery is likely to lead to a further deterioration of the financial institutions’ asset quality,” AMRO added.

Given the aforementioned risks, AMRO suggested that Cambodia should focus on speeding up vaccinations and adjust fiscal policy to be more flexible.

Faster vaccinations is the most crucial ingredient to prevent severe and widespread infection that could lead to long-term economic stagnation. Thus, the quicker the vaccine rollout, the better hope for Cambodia.

Besides, adjusting fiscal policy is another vital task for the Cambodian government.

“As the rollout of a broad fiscal stimulus package has played a vital role in supporting the economy. Fiscal support measures should become more flexible and targeted given the uneven recovery across sectors,” ARMO added.

“Short-term crisis support should be more targeted and gradually shift toward supporting affected businesses and facilitating the swift reallocation of labour and productive resources to sectors with strong growth potential,” the organisation added.

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