- Cambodia is now weathering an oil price shock, just as the economy had started to recover amid a rollback of COVID-19-related restrictions.
- Negative impacts of the oil price shock are amplified by Cambodia’s already large external imbalances.
- Rising global energy and food prices are fueling higher inflation, and in Cambodia, poor and vulnerable households with limited savings are likely to bear the brunt of the oil price shock.
- Meanwhile, the “living with COVID-19” strategy has enabled a reopening of the economy since late last year.
- Cambodia’s economy will grow by 4.5 percent in 2022 but the road ahead remains unclear.
- The fiscal deficit is expected to widen to 6.3 percent of GDP, as the government will need to continue spending programs to support the poor.
- Over the medium term, the economy is expected to grow at around 6 percent annually, with the new investment law, together with free trade agreements, helping to boost investment and trade.
The report recommends policies that can help sustain economic recovery, include:
- continued efforts to contain COVID-19 infection,
- strengthening consumer and investor confidence,
- promotion of exports, particularly in agricultural commodities, by facilitating trade and reducing the costs of doing business, and
- stabilization of retail prices.
The Special Focus section of the report looks at post-pandemic supply chain disruptions and explains how to develop strategies to reduce logistics costs. Its findings are:
- Rising oil prices are hurting exports of agricultural commodities.
- Cambodia’s infrastructure remains underdeveloped, and the country’s performance in logistics has been significantly below other countries in the region, thereby triggering higher costs.
- Increasing supply chain reliability and service quality is key to improving Cambodia’s logistics performance, as predictability is not just a matter of time and cost but also a component of shipment quality.
- Efforts to increase Cambodia’s competitiveness, facilitate international trade, and enhance its connectivity to better serve consumers and meet the needs of regionally integrated facilities for reliable delivery of inputs and outputs will require a systematic approach that goes beyond merely improving physical assets.
- In the short term, it is crucial to strengthen the entire supply chain by monitoring efficiency of main trade gateways, expanding the “Best Trader scheme” to the wider logistics sector, and establishing “ROADWATCH,” a hotline for traders and citizens to report irregularities.
- In the medium-to-longer term, it is important to develop a comprehensive intermodal and logistics strategy and action plan, champion urban logistics initiative and planning, promote specialized logistics and e-commerce, and support real-time visibility and transparency of freight movements.