Economic growth in Cambodia is estimated to reach 6.7 percent this year, a 0.2 percent drop compared with 2011, the U.N said in a report released on Friday, citing a modest slowdown in exports from Cambodia to the U.S and Europe.
In its Economic and Social Survey of Asia and the Pacific reports for 2012, the U.N said that although Cambodia’s economy is still very narrowly based with a disproportionate amount of dependence still resting on the garment sector, the tourism and agriculture industries are predicted to register strong growth this year.
With manufacturing of garments expected to decrease slightly this year as economies contract in the European Union and the U.S, the U.N said that government incentives should be directed to new areas to create new economic activities.
“When countries fail to create new economic activities and sufficient productive employment, many of their citizens migrate overseas in search of better opportunities,” the report said.
Countries like Cambodia “should reduce their reliance on a few labor-intensive manufacturers and diversify their activities in order to become participants of supply chains,” the report added.
While Cambodia’s agriculture output grew by 3.3 percent last year, garment exports still accounted for 80 percent of all export revenues, according to the report.
Hang Chuon Naron, secretary of state at the Ministry of Finance, said on Friday that in 2011 Cambodia had exported 170,000 tons of milled rice to markets abroad compared to just 51,000 tons the previous year.
“Rice exports increased three times and 80 percent of the total amount went to Europe,” he said.
The Construction and real estate sector began to recover last year, according to the U.N report, following their collapse during the 2009 global financial crisis. Their recovery was spurred on by renewed credit to the private sector, as well as foreign investment.
Tourism also saw a recovery, increase last year by nearly 15 percent compared with 2010, while the industry as a whole increased by 5 percent.
The report also expressed concerns over possible inflation and the European debt crisis that is feared will curb the number of exports going from Cambodia to Europe.
“In 2012, the open economies of Southeast Asia are expected to be hit by the spillover effects of global uncertainties and growth moderation in China,” the report said.
Still, the report said that although rising incomes had led to rising inequality in Cambodia, the government’s “renewed focus on agriculture” could be an opportunity for more inclusive growth of the population.