Cambodia's economic growth is forecast at 7.2 percent in 2013, picking up to 7.5 percent next year as recovery in Europe and the United States takes hold, according to the Asian Development Bank's annual economic outlook released on Tuesday.
The United States and Europe are the largest purchasers of Cambodia-made garment and footwear products. "European demand for Cambodian garments and footwear is expected to maintain good growth, supported by duty-free access to the Europe," the report said. "Shipments to the U.S. will likely be subdued this year, but should pick up after that."
Cambodia's economy is mainly supported by four main sectors-- garments, tourism, real estate and construction, and tourism.
"Domestic consumption, exports and investment, especially foreign investment, will all drive growth this year and next year," Peter Brimble, ADB deputy country director and senior country economist, said during the report release.
The report noted that net foreign direct investment (FDI) inflows into Cambodia surged by an estimated 75 percent in 2012, to 1.5 billion U.S. dollars, funding new industries including automotive parts, electronics, and processing of agricultural products, as well as diversifying garment production into higher- value products and tourism into new areas.
It said that about 23 percent of the total FDI inflows into Cambodia last year came from China, and the rest came from other countries in ASEAN, Asia and Europe.
ADB senior economics officer Poullang Doung said Tuesday that the industry sector as a whole is expected to expand by 10.5 percent in 2013, while the service sector is expected to grow by about 7 percent, with strong growth in tourism and real estate activity.
Agriculture is likely to grow by 4 percent, assuming favorable weather, he said. He added that the inflation rate is expected to average 3 percent this year, assuming stable domestic food prices, and rising to 3.5 percent in 2014 due to robust domestic demand.
Cambodian secretary of state of the Ministry of Economy and Finance Hang Chuon Naron said Tuesday that the government projected that the country's GDP is expected at 7 percent this year, driven by garment exports, tourism, agriculture, real estate and construction.
"We expect that Cambodia will get out of the classification of a low-income to a lower-middle-income country at the end of this year," he said.
Lower-middle-income countries are those with GDP per capita between 1,006 U.S. dollars and 3,975 U.S. dollars, as defined by the World Bank.
Last year, the country's GDP growth was 7.3 percent and the GDP per capita was nearly 1,000 U.S. dollars, he said, forecasting that the GDP per capita will increase to 1,080 U.S. dollars this year.
While Cambodia's growth prospects remain positive, chronic poor health and malnutrition is stunting the growth of 40 percent of Cambodian children, the ADB's report warned.
"Left unaddressed, Cambodia's continuing high incidence of child malnutrition will negatively affect future productivity and economic growth due to the associated irreversible long-term damage to physical and cognitive development," it said.