Phnom Penh - The International Monetary Fund revised down its forecast for Cambodia's economy Wednesday, predicting that gross domestic product (GDP) would contract 2.75 per cent in 2009. That is sharply lower than its previous forecast of a 0.5-per-cent drop.
The IMF figures follow the release of numbers Tuesday by the Asian Development Bank, which foresees Cambodia's economy contracting 1.5 per cent this year.
Speaking to reporters in Phnom Penh, IMF official David Cowen said the global economic crisis was having a more significant impact than previously expected on the kingdom's economy, which suffers from a narrow production base.
Cambodia's economy rests on four key pillars - agriculture, tourism, construction and garments. The last three have all been badly hit by the crisis.
The IMF noted in its press statement that agricultural production was "a bright spot with a good harvest expected" this year.
"Investment in rural roads and irrigation systems should raise productivity and reduce operating costs in the period ahead," the IMF stated.
But the three remaining pillars have performed worse than expected. Garment exports, for example, are expected to decline 15 per cent, a drop Cowen blamed in part on weak retail demand in the key US market, the destination for most Cambodian garments.
But he said the country also remains less competitive than other garment exporters in the region, and as a result has lost some market share to countries such as Bangladesh and Vietnam.
Tourism too has been disappointing if measured by spending rather than actual visitor numbers. The IMF said arrivals by air - typically indicating higher-spending tourists - had fallen "by double digits" due to the global economic crisis affecting visitor nations.
"As a consequence, overall tourism spending is sharply lower, despite the increase in same-day and land arrivals from neighbouring countries," the IMF said.
The remaining pillar - construction - has been hit hard with many projects shelved or put on hold following a property boom that ended abruptly last year.
"New project approvals are sharply lower, and imports of construction materials are down significantly compared to 2008, with bank lending to the property [sector] also down," the IMF noted.
Foreign direct investment is also expected to end the year sharply down, the IMF said, and is projected at 490 million US dollars this year versus an estimated 815 million US dollars last year.
The IMF expects a turnaround next year, with growth predicted at 4.25 per cent amid signs that the global downturn is bottoming out. However, it cautioned that the risks for Cambodia remain "tilted to the downside," a sharp reversal after a decade in which the nation regularly enjoyed annual double-digit growth.
