Recent developments

Real gross domestic product (GDP) is projected to grow 2.2 percent this year. Despite a recovery of manufacturing exports and an expansion of agricultural commodity exports, the trade deficit has widened significantly. To mitigate the negative impacts on poor and vulnerable households, the authorities have extended the COVID-19 cash transfer program until December 2021 under the program’s seventh round, while introducing additional assistance. As of October 2021, 678,459 households or 19 percent of all households, have received the cash transfer from the government. On average, each poor and vulnerable household covered by the program receives about US$45 per month. Poverty continues to remain higher than pre-pandemic. The results of a High-Frequency Phone Survey of Household shows that employment has yet to return to pre-pandemic levels. The negative impacts of the pandemic on non-farm family businesses remain substantial, caused mainly by weak consumer demand. Nearly half of households report having experienced declines in income between December 2020 and March 2021. This suggests that a certain proportion of households that are negatively affected by COVID-19 continue to suffer from income losses, which could potentially lead to an increase of poverty. Under the new poverty line, about 17.8 percent of the population is identified as poor. Poverty rates vary considerably by areas of residence. Poverty rate is the highest in rural areas (22.8 percent).

The share of households that reduced food consumption to cope with the shock was higher in Cambodia than other countries in the region, especially among those that lost income.

Outlook

Real GDP growth is projected to reach 4.5 percent in 2022.

Challenges and risks

Risks remain tilted to the downside. Cambodia is expected to graduate from least developed country (LDC) status in the next several years.

Policy options

To jump-start the economic recovery, it is crucial to create enabling environments, underpinning key growth drivers to accelerate. The relaxation of travel restrictions is fundamental for a recovery of the tourism, travel, and hospitality industries that will boost job creation and help propel the economy. To attract FDI inflows, taking advantage of improved external demand conditions, it is crucial to promptly introduce necessary regulations and arrangements to smoothly implement the newly introduced Law on Investment.

Further investment in human capital will make an important contribution to improving productivity and competitiveness. Findings discussed in the special focus section below reveal that Cambodia suffers substantial learning and earning losses.