Cambodia’s Economic Projections for 2023-2024: ADB’s Cautious View of Rising Expectations

• 1 November 2023
• Local News
• 2012 Views

In a dynamic economic environment, Cambodia’s growth trajectory for the coming years is under scrutiny, with varying projections from top financial institutions. The World Bank, the International Monetary Fund (IMF), and the Asian Development Bank (ADB) all offer distinct perspectives on the nation’s economic future. Yet an interesting point is, why is the Asian Development Bank (ADB) forecast for the Cambodian economy lower than other forecasts?

Earlier this year, the World Bank affirmed its growth forecast for Cambodia, maintaining a consistent projection of 5.5% for 2023 and 6.1% for 2024. This reaffirmation in May 2023 underscores confidence in Cambodia’s economic resilience.

On 18 December 2022, the IMF initially projected Cambodia’s 2023 growth at 5.5%, only to then revise it upward to 5.6% in October 2023, with a continued optimistic outlook of 6.1% for 2024. These adjusted figures signify a positive shift in the nation’s economic landscape.

However, the ADB, while initially forecasting a 5.5% growth for Cambodia in 2023, later revised its projection downward to 5.3%. The reason behind this adjustment can be attributed to slower-than-expected industrial growth in the first half of the year, highlighting the industrial sector’s performance concerns. Even with a modest 0.3% correction, this adjustment carries substantial weight, emphasizing the importance of a reviving industrial sector for sustainable growth.

A deeper analysis of the ADB report reveals adjustments in sub-sector forecasts. Notably, the service sector is expected to outperform, with growth projections increased from 7.3% to 8.0% for 2023. On the flip side, the forecast for the industrial sector was downgraded from 5.8% to 4.8%, and the agriculture sector’s growth forecast dipped from 1.1% to 0.9%. These variations spotlight the evolution of Cambodia’s economy, where a service sector rebound is compensating for challenges in the industrial and agricultural sectors.

Looking ahead to 2024, the World Bank and IMF are optimistic, projecting a robust 6.1% growth rate, while the ADB conservatively maintains its forecast at 6.0%.

A notable discrepancy in the forecasts is the inflation rate. The IMF anticipates a 2.0% inflation rate for 2023 and 3.0% for 2024, while the ADB predicts higher inflation at 3.0% and 4.0% for the same periods. This divergence underscores the critical role of inflation in the overall economic health. Moderate inflation at around 2% is generally considered conducive to economic growth, whereas 4% represents a concerning rate.

These forecast disparities may be attributed to variations in methodology or differing policy assumptions. Nevertheless, the ADB report emphasises the influence of external and internal factors on Cambodia’s economic health. Key contributors to the nation’s recovery include a resilient service sector, driven primarily by a strong tourism rebound.

In response to these challenges and opportunities, Cambodia should consider policies that mitigate risks and support priority areas. Trade agreements, infrastructure investments, and human resource enhancements, when integrated into a comprehensive macroeconomic framework, are likely to positively impact the country’s economic growth.

In a constantly evolving economic landscape, these diverse forecasts offer a glimpse into Cambodia’s resilience and adaptability, shedding light on the nation’s path forward.

• Economy and Finance