Recent Macroeconomic Developments
- While remaining robust, the economy has eased, projected to decelerate to 7% this year. Regional growth also slowed in the first half of 2019.
- Exports moderated amid weakening global demand and heightened trade policy uncertainty. Bustling construction activity, however, continued.
- Investment appetite remained strong, but foreign direct investments (FDI) inflows slowed (and large proportion continued to finance construction).
- Downside risks: Everything But Arms (EBA) suspension, a sharp slowdown in the Chinese economy, and potential vulnerabilities arising from prolonged construction boom.
Risks and Policy Approaches
Downside risks, arising from domestic and external factors:
- Possible withdrawal of the EBA initiative;
- A sharp slowdown in the Chinese economy; and
- A prolonged construction and property boom and the increase of credit provided to the construction sector.
Policy approaches to manage rising risks:
- A well designed fiscal stimulus to be financed by government savings will help cushion negative impacts of EBA withdrawal, if occurs;
- Continue to improve external competitiveness by facilitating investment and trade and enhancing the ease of doing businesses, while advancing Cambodia’s participation in regional and global value chains (see special focus); and
- Implement macroprudential policies.