CAMBODIA:Macroeconomic Challenges

Carson ChristianoBen ThornleyApril 23, 2009

Overview

• Cambodia’s Rapid Growth• Macroeconomic Imbalances• Vulnerability to Global Recession• Recommendations

Cambodia’s Rapid Growth

Per capita GDP doubled from US$285 in 1997 to US$593 in 2007

Population Growth

A Changing Economy

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10

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60

Agriculture Industry Services

20002007

% of economy

Open For Business

Macroeconomic Imbalances:Accumulating Debt

Macroeconomic Imbalances:A Spike in Prices

Macroeconomic Imbalances:Real Riel Appreciation

Macroeconomic Imbalances:Narrow Economic Base

• Economy is dependent on very few industries: tourism, construction, agriculture, and garments

• Garments account for 88% of export volume

• Demand from US and UK shrinking

• Garment exports are down 27%

• 30,000 workers laid off in the past 12 months

Vulnerability to Shock:Impact on Aggregate Demand

Shortfall is equal to KHR 2.4 trillion, or 6.5% of forecast GDP

In 2007 and 2008, the IMF forecast GDP growth rates in Cambodia of 7.75% in 2008 and 4.75% in 2009. In November 2008 the IMF revisited its GDP growth forecasts to 6.5% in 2008 and -0.5% in 2009.

Vulnerability to Shock:Dependence on Foreign Assets

Recommendations

1. Implement a fiscal stimulus2. Diversify and formalize economy3. Strengthen regional integration

1. Fiscal Stimulus

AA

DD1 DD0,2

Yr Yf

2. Diversify and Formalize Economy

• Develop human capital• Leverage core competencies• Explore new capabilities• Strengthen investment climate

Information Board, Kampong Chhnang Province

3. Regional Integration

• Explore new markets• Increase inter-regional trade• Leverage expertise of ASEAN partners

Questions?