Analysts Question ADB’s Property & Construction 2021 Growth Forecast

• 29 April 2021
• Local News
• 4346 Views

The Asian Development Bank (ADB) on 28 April released a report forecasting that the Cambodian economy will grow by 4% in 2021 and 5.5% in 2022, while the construction and real estate sectors are also expected to recover from last year’s contraction.

This growth forecast is indeed a positive sign. However, given the current lockdown and community outbreak situation, will the growth happen as forecast?

The ADB did not provide any methodology on how to forecast the growth but stated that the growth is backed by the economic recovery in major trading partners which can help boost demand for Cambodia’s exports, and the government’s rapid response to control the COVID-19 pandemic.

On the other hand, the ADB also revealed four key risks that can disrupt the growth forecast. These include widening community outbreaks of COVID-19, slower than expected growth for Cambodia’s major trading partners such as the US and EU, continued weakness in domestic demand, and stress on financial services and banking.

In the report, ADB also states that although growth could happen as projected, not all sectors and regions would benefit equally. The uneven pace of the recovery across sectors will continue to put pressure on some households and firms this year, which will slow down the overall recovery.

To date, the surge in community outbreak keeps escalating. Phnom Penh, as well as some major provinces, are still in lockdown, which slows down the economic activities.

Despite the lockdown, the number of positive cases remains high, which give more reasons for the government to continue the lockdown measure. As a result, the construction and property sectors, as well as the economy as a whole, will continue to be stagnant.

Two real estate experts, founder and director of Key Real Estate Mr Sorn Reap, and former CRBE Cambodia Managing Director An Sothida have predicted that community transmissions are putting quite severe pressure on the real estate market and will continue to get even worse if the situation prolongs. (Read more)

According to the two experts, the real estate sector may be affected even more seriously than in 2020. In the best-case scenario, if the sector could recover, it should start from Q3 2021.

Likewise, the construction sector is also under pressure from closures. Huy Vanna, Secretary-General of advisory firm Housing Development Association of Cambodia told the Phnom Penh Post that the lockdown has severely hampered the construction sector, especially in Takhmao and Kandal provinces.

This has led him to predict that construction activity in 2021 will be lower than in 2020.
The value of approved construction projects in 2020 was $7.753 billion, down 32% from US$11.43 billion in 2019, according to a report from the Ministry of Economy and Finance. (Read more)

Again, in the best-case scenario, the community outbreak is under control and every sector starts to recover from Q3 onwards, but then Cambodia has only one quarter remaining left for growth in 2021. So is it possible that the economy can grow by 4% as forecast by the ADB? In fact, although Cambodia had no lockdown in 2020, the economy still contracted by 3.1%.

• Economy and Finance