The Mirror of the Cambodian Economy in 2009 – Tuesday, 16 December 2008

Posted on 18 December 2008. Filed under: Week 591 |

The Mirror, Vol. 12, No. 591

“Cambodia made remarkable achievements in terms of macro-economic stability, but there are many concerns which create an increasingly unclear situation for the future of the economy. The growth of the GPD was on average 11.1% since 2004, and 10.2% in 2007, and the annual inflation rate was 5.1%.
“The demands for garment export from foreign countries are lower, the profits from the construction sector are diminishing, and the number of tourists drops, so that it is estimated that the GDP growth drops to 6.7% in 2008 and 4.9 in 2009. This drop is estimated to occur, despite expanding taxation. As for the expenses, the negative figures of net exports will increase in 2008 and in 2009, and investments will also decline much.
“There are many challenges affecting four important fields of possible growth. First, the rising price of rice seems to provide many opportunities for Cambodia, a rice exporting country, although the size of response by strong supplies is still unclear, because of the recent drop of price and of agricultural investments, which are still limited.
“Second, the garment sector is affected by the meltdown of the economy in the United States of America, which is a big export target country for Cambodia (though many companies are partly protected, because they serve the low end market with cheap prices); in 2009, the restrictive protection measures by the United State of America and by the European Union towards China come to an end, which is a big challenge, because this country has big garment export capacities.
“Third, the construction sector is declining by 17%, compared to the first six months of last year.

“Fourth, tourism is also affected by the global economy which is weaker than before, and by the border disputes with Thailand. The increase in the number of tourists visiting Cambodia declined from 20% last year to only 13% in the first six months of 2008.
“Commercial recession will further drop in 2009, because the export of garments to foreign countries will decline more. The growth of exports declined from 18% last year to 4% in the first six months of 2008. On the contrary, the growth of imports is strong, reflecting the increase of local demand and higher prices for the import of fuel early in this year. Consequently, the current account deficit is estimated to grow from 8.4% of the GDP in 2007 to 12.3% in 2008.
“Although there is a plunge in exports, the cost of the import of fuel which is now lower than before, and the diminishing local demand seem to make the current account deficit decline to around 8% of the GDP in 2009. Foreign investment is forecast to drop from a high level of 10% of the GDP in 2007 to only 5.2% in 2009, because foreign investors become more careful to invest in different developing countries.
“The pressure of inflation starts to drop. Inflation of the consumers’ price for twelve months went up to the highest rate at 25.7% in May 2008, an increase to the double compared to late 2007, before it declined to 18.1% in October 2008. Food prices have contributed much to the inflation to grow to the high current level, as food accounts for a big share of more than half of the consumers’ price index.
“The increase of local demand is also a factor when banks increased credit in circulation, out of the amount of money held in banks and also related to the flow of foreign capital. The effect of the rising price of fuel imports was decreased by administrative intervention in the price. Even though there is a considerable drop of the price of food and of importing energy, the inflation in twelve months is estimated to decline from 16% last year to only 10% in late 2009.
“The central bank’s restrictive currency policy helps to reduce inflation and financial hazards. The central bank increased the requirement of capital held by the banks in July 2008 to the double amount, setting a ceiling for loans to the real estate sector, increased the required capital holding rate in September 2008 for the third time, and limited the withdrawal of cash from the central bank in October 2008.
“As a results of those measures, the increase in credit taken out by the private sector during twelve months declined from 103% in June 2008 to 82% in September, and it is estimated that it will drop to 42% in December 2008. The stable currency exchange rate, on average Riel 4020 per US$1 in the first six months of 2008, dropped little since the middle of the year, motivating the central bank to stop interventions in the currency exchange market.
“Recent concerns show the difficult balancing of taxation policy. At first, the government responded to the effects of high food and fuel prices by implementing a stricter taxation policy to ease the inflation pressure on the economy which uses the dollar as a measure of reference.
“However, in the meantime in view of some positive aspect of the growth rate and the declining inflation pressure for whatever reasons, the government is changing to new ways, and it is making plans to increase expenses. The taxation recession is estimated to change little at 2.2% of the GDP in 2008 (before considering aid), and the government estimated that it will increase to 3.5% in 2009.
“The government continues its different reform efforts, although there was some decline during the elections. The improvement of the legal framework (especially the adoption of a law about the handling of assistance which makes it easier for companies to use their real estate as collateral for borrowing money), helped to move Cambodia up in an investment report for 2009 (from 150th to 135th, among 181 countries).
“Another important new reform was the institution of an automated system for customs data at the Sihanoukville port in May 2008. In September 2008, the government began to implement the second stage of its Rectangular Strategy by focusing on good governance and rural development again.”Samleng Yuvachun Khmer, Vol.15, #3456, 16.12.2008

Newspapers Appearing on the Newsstand:
Tuesday, 16 December 2008

Chakraval, Vol.16, #2834, 16.12.2008

  • The Siamese [Thai] Parliament Voted [235 for and 198 against], Supporting the President of the Opposition [Democrat] Party [Abhisit Vejjajiva – อภิสิทธิ์ เวชชาชีวะ] to Become Prime Minister, while Red-Shirt Demonstrators [supporters of ousted prime minister Thaksin Shinawatra] Surround the Parliament to Protest
  • [Four] Stalls at Phsar Kandal Market Burned, Surprising the People at Night [Phnom Penh]

Kampuchea Thmey, Vol.7, #1821, 16.12.2008

  • [Cambodian former prime minister] Pen Sovann Will Sue The Cambodia Daily if It Does Not Apologize to Him [for saying that he wants to leave the Human Rights Party and return to the Cambodian People’s Party]
  • The Mong Reththy Group Imports 150 Yorkshire Pigs from England to Be Fed and Bred in Cambodia
  • A Japanese Organization [ALC] Grants Scholarship to [20 outstanding] Cambodian Poor Students [to learn Japanese at the Royal University of Phnom Penh. – ALC – only in Japanese is here]
  • [The Minister of Foreign Affairs] Mr. Hor Namhong Went to Pay Respect to the Soul of Mr. Ali Alatas at the Indonesian Embassy in Phnom Penh [Mr. Ali Alatas was Minister of Foreign Affair and was an important person to help seek peace for Cambodia, his efforts contributed towards democratic elections in 1993]

Khmer Sthapana, Vol.1, #159, 16.12.2008

  • Dangkao District’s Authorities Stop Actions of the Stubborn Owner of a Pit [which is dug deeply to dig out soil for sale, causing nearby farmland to slide into the pit – the owner of the pit is a brigadier general]

Koh Santepheap, Vol.41, #6526, 16.12.2008

  • ASEAN Summit Meeting: Thai Foreign Affairs Officials Organize the Meeting for the Third Week of February Next Year [in Chiang Mai]
  • Second Hand Clothing Vendors Protest against the Payment of Taxes in Poipet [of Riel 1.5 per kg, to get export permission to Thailand – Banteay Meanchey]
  • Vang Sreyno [a famous film star] Wrote a Letter to Apologize to the Municipal Governor so that She Is Not Accused at the Court [regarding her high-speed driving, which caused an accident damaging the lion statue at the Samdech Preah Sanghareach Chuon Nath Memorial]

Moneaksekar Khmer, Vol.15, #3640, 16.12.2008

  • Ethnic Minority Tribespeople in Ratanakiri’s Ta Veng District React against a Project to Clear Thousands of Hectares of Forest Land [provided as concession land by the government to the Sovannaphum Company to grow industrial crops]

Rasmei Kampuchea, Vol.16, #4769, 16.12.2008c

  • Kratie Police and Military Police Confronted Each Other over a Intercepted Truck, Loaded with Illegally Cut Luxury Wood of More than 20 Cubic Meters [the Kratie deputy military commander, Mr. Sak Sarang, demanded the wood back from the police, to put it into the military police station in Kratie, but the Stung Treng police disagreed]
  • Three More Khmer Registered Ships Are Said to Be Impounded in Russia [for illegal fishing]
  • Experts Said that the Place where Bird Flu Appeared Is Under Control[Kandal Stung, Kandal]
  • More Than 200 Bikers [including foreigners] Participated in Bike Racing in Kirirom [Kompong Speu]
  • An Iraqi Reporter Threw His Shoes at [US president] Bush in Baghdad [in a press conference with the Iraqi prime minister – to express his condemnation for the killing of so many Iraqi people]

Samleng Yuvachun Khmer, Vol.15, #3456, 16.12.2008

  • The Mirror of the Cambodian Economy in 2009

Have a look at the last editorial – you can access it directly from the main page of the Mirror.

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