- While the Cambodian economy continues to suffer from the impacts of the COVID-19 pandemic, there are signs that economic activity is beginning to pick up. The economy is projected to contract by 2 percent in 2020, but is expected to bounce back and grow by 4 percent in 2021.
- With the easing of social distancing measures, domestic economic activity is gradually returning to normal. Consumption is being partly underpinned by unprecedented government intervention, while inflation remained subdued.
- FDI inflows to projects in non-garment industries and agriculture have been rising, likely attracted by Free Trade Agreements, according to the report.
- Although total manufacturing exports have been hit by the pandemic, exports of bicycles, electrical parts, and vehicle parts and accessories are rising, and exports of rice and other agricultural commodities have surged. Domestic tourists have supported a partial recovery of the travel and tourism industry.
- Government intervention is unprecedented, accounting for 5 percent of GDP to support the affected people, including health-related spending and income assistance, equity injections and loan guarantees, development spending, and tax relief.
Recent high frequency telephone surveys conducted by the World Bank show that:
- The share of respondents who were working declined from 82 percent before the COVID-19 outbreak to 71 percent in May 2020 - a number that remained relatively unchanged in August 2020.
- The pandemic continued to negatively affect non-farm business activities, but less severely compared to during the immediate onset of the crisis.
- Income losses remained widespread, though the declines in household income slowed following the launch of a new cash transfer program to assist poor and vulnerable households. The surveys showed that roughly 90 percent of the households identified as poor reported cash relief in August and September.
- Downside risks include local COVID-19 outbreaks, a deeper and prolonged decline in tourist arrivals linked to a lingering global pandemic and the speed with which the vaccines become widely available, and the possibility of increased global trade tensions and protectionism.
To help the country quickly recover from the pandemic, the report recommends:
- Boosting pro-poor and growth-enhancing public investment including cash-for-work projects, while promoting labor-intensive sectors to generate jobs by taking advantage of the quick recovery of domestic demand for consumer goods. Facilitating an expansion of domestic and foreign investment arising from recent bilateral and regional free trade agreements, including the Cambodia-China Free Trade Agreement and Regional Comprehensive Economic Partnership (RCEP).
- Developing a strong COVID-19 vaccine infrastructure, as well as closely monitoring economic vulnerabilities arising from the prolonged construction and property boom.