Cambodia plays catch-up with Vietnam
Cambodia’s government, central bank and financial institutions rose to the challenge of mitigating the impact of the pandemic, with some success. There is more work to be done – but a growing focus on innovation and digitalization could herald a new beginning.
Cambodia has had a tough two years. While the pandemic shoulder-checked growth everywhere with varying degrees of severity, it hit Cambodia’s gross domestic product trifecta of garments, construction and tourism with precision and efficiency.
The crisis not only slammed sectors which account for 70% of GDP but also derailed investment in oil production, which prime minister Hun Sen considers crucial for the nation’s future.
Now, rising global inflation poses a new threat which may be even harder for Asia’s longest-serving leader to address. Most of the price pressures are coming from overseas, particularly from the US and China. In 2021, the world’s two biggest economies suffered their worst inflation rates in 31 and 26 years, respectively.
That has US Federal Reserve officials in Washington beginning to taper their vast asset purchases of recent years, which had jumped significantly during the pandemic. Economists reckon an actual monetary tightening cycle is imminent, with perhaps the first synchronised global rate-hike cycle in more than a decade.
This prolonged disruption will affect Cambodia’s economy and the recovery
Developing Asia still seethes over the events of 2013, when the mere hint that the Federal Reserve, the globe’s most powerful monetary authority, might close its wallet caused havoc in markets.