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Macro-Economic Development

Growth, Poverty, Reform Priorities

The development challenge facing Cambodia is to sustain growth, reduce poverty, and accelerate the completion of the reform agenda. To accomplish these medium term goals will require effective economic management and considerable inflows of external assistance in order to support the implementation of public investment priorities and raise the pace and consistency of structural reform. Moreover, mechanisms to reduce poverty and protect vulnerable groups from accelerated transformation must be put in place. The development needs of Cambodia have shifted from survival mode to a medium term strategic framework for rapid adjustment and growth supported by sound macro and sectorial policies, and complementary public investment and technical assistance programs.

Adjustment and growth, such are the objectives pursued by the MEF. It is important to strengthen the macroeconomic balances in order to allow for the healthy, sustainable growth of the economy. On this basis, sector-driven strategies tended to increase and diversify production, parallel with the budget strategy of reducing financial dependence and encouraging social progress.

The path covered in five years (1994-98), albeit one that shows deficiencies to be corrected and delays to be resolved, seems satisfactory, overall. Progress has been noteworthy and the results indicators positive mainly due to a good concurrence of external factors affecting economic development, and also to the clear direction given by national policies.

Results Indicators - Positive Development

The outcomes of the results indicators appears to be positive, according to the information in Table below:

1. A real average annual growth rate of 5.2% for the period. Had it not been for the downturn in 1997 which will continue to make be felt to a lesser extent in 1998, the average annual growth rate could have reached 6.0%. In this regard, 1995 and 1996 have clearly very high scores, which were lining Cambodia up among the Asian dragons until the recent crisis occurred;

2. A per capita GDP on a constant growth curve, from US$241 in 1994 to US$303 in 1996, with a slight decline in 1997 ($290.9);

3. A CPI that broke free from the soaring increases of the previous years to stabilize from 1996 onwards at a about 9%;

4. A deficit in t he current balance excluding transfers, which is sustained at 14-15% of GDP, despite the. increase in imports due to investments;

5. Foreign exchange reserves that reached over two months of goods and services imports;

6. Foreign contributions that covered the gross deficit of the current balance on an annual average for 1994-97, in the amount of 134%, with the surplus helping to improve the gross foreign exchange reserves.

External Factors and the Funding or Deficits

Factors external to the evolution of the economy are related to official transfers such as donations, capital transfers in the form of loans from international organizations and, lastly, to foreign direct investments (FDI). The aggregate of such external contributions covered, on a annual average from 1994-97, the gross deficit of the current balance in the amount of 134% (the surplus contributed to the improvement of the gross foreign exchange reserves to cover 2.7 months of imports in 1997). However, although official transfers and capital transfers are being maintained from one year to the next, about 8-

1 1 % and from 2-3 % respectively of GDP, these did drop in 1997 by about 8 % with relation to the initial forecasts and by 20% compared to 1996. On the other hand ' FDI that had grown at a very sustained pace since 1093, dropped by 21% in 1997 with relation to the forecasts. There is reason to fear that, in view of the Asian financial cataclysm, such investments will not rapidly pick up the dynamic growth that they experienced up till now.

National Policies and Economic Development - Budget and Monetary Policies.

Expansion of the monetary supply was strong during the years 1994-97, with an annual average rate of 35.7%, and for an average 5.2% of GDP. However, no monetary financing of the Treasury was undertaken with -the National Bank of Cambodia until late 1997. In reality, the foreign currency deposit component explains this growth; liquidity in Riels has grown at an annual average rate of 13.7%. Still, this development is especially due to the exceptional year in 1997 (+33.4%). Nevertheless, the Riel-US Dollar parity has remained very stable during the period, i.e. at the end of the period 2,593 in 1994; 2,560 in 1995; and 2,720 in 1996. It was only during the second half of 1997 that, suffering the effects of the Asian monetary cataclysm, the Riel went up to 3,500 for US$I; since that time, it has basically maintained itself at this level.

However, a good macroeconomic performance was obvious in the – liberalization of the rate of exchange, the stabilization of inflation to a tolerable level, and the revamping of the commercial framework (removal of restrictions on imports and obstacles to exports).

Taxation-an up-to-date tax system, but still yielding inadequate results

The Government undertook the renovation and reinforcement of a taxation and duty system that was still in infancy. The country was slowing getting away from a command economy. The option was made for a modern, performing tax system, but by means of a progressive approach that would allow for reasonable time for the new economic structures to adapt and for State employees to be trained. With the year 1998-after the Taxation Code of February 1997, pending enforcement of the VAT on large commercial enterprises in 1999, and with the Customs Code yet to come out-the Cambodian approach will be five years old.

The current nomenclature of é taxes and duties is a good reflection of the tax structure as it is found in most countries in the world. An analysis of the relationship between tax revenue and the components of GDP that are the basis thereof gives rise to the following observations:

What is called the tax ratio and which means the actual levy made on GDP, experienced a rapid increase between 1993 (4.32%) and 1994 (5.95%), when the initial tax measures kicked in. Since that time, the tax ratio continues to be around 6% -- with a peak of 6.46% reached in 1997 -- the lowest rate in the world, even compared to the Least Developed Countries (LDCs). In the Southeast Asian region, the tax ratio rate was already 9.53% in 1984 in the Philippines; 14.34% in Thailand; 1 26.93% in Indonesia; 21.53% in Malaysia. the Philippines is the only country where the rates appear relatively low-, although the rate quickly increased to 15.5 1 % in 1992. That is about the same rate as in Vietnam (I 5.4% in 1993 for a GDP per capita that is lower than that of Cambodia), while Laos was at 7.4% in 1991.

* 43% to 46% of GDP is not subject to taxation due to the rightful exemption of agricultural production;

* When only the potentially taxable GDP is considered, the average tax rate of national production barely reaches,8% (from 7.63-7.95% depending on the year);

* Internal taxation, aside from customs duties, remains weak, if not negligible; income- profit taxes carried over to the potentially taxable GDP is less than 1% (0.36 - 0.77%, except for 1998 which is forecast for 1.23 ˜%). At the same time, the ratio between domestic indirect taxes and potentially taxable GDP is barely above 1% (0.59 - 1.36% depending on the year);

 * The average rate of tax on imports remains at a very reasonable level (IO - 13 % on total imports);

 * Private consumption that supports both the domestic indirect and import taxes is only a very small contributor to taxation, between 7 - 8% -- whereas in all the countries of the world this is the main source of tax receipts.

Cambodia’s economy grew at a cracking pace of 11.1% between 2004-2007 but slow to 6.8% in 2008, and further to 4.9% in 2009, according to World Bank figures. A more liberal attitude has in the past few years brought in huge investments, especially in construction from Asian investors, primarily the Koreans, Thais and overseas Chinese. However, despite the recent double-digit numbers, it remains one of the world’s poorest economies, with 35% of its 14 m. people living on less than US$0.50 a day.

Cambodian Agriculture and Fishing

The global credit crisis has affected its top industries –garment manufacturing, tourism and construction. Cambodia is still largely an agrarian rural society since 80% of its population lives in the countryside, and work in agriculture and fishing. Improving yields on rice crops is pretty necessary for its economic growth and the 2009 stimulus budget of US$1.8bn aims to boost agriculture, infrastructure and education. The rubber industry is bouncing back after a hiatus. Wood and paper are taking off but preserving the virgin forests is a growing concern.
Labor Friendly Garment Sector

The garment sector earns 80% of its foreign exchange and employs 350,000 people. Cambodia is attempting to show the world it is an ethical producer with air-conditioned factories and friendly labor relations. Nonetheless, in order to stay up against brutal competition, it needs to further straighten its dealings with labor.
Tourists Arrivals Continue Strong

Tourist arrivals have doubled nearly every 3 years from 300,000 visitors, when doors were barely opened, to an expected 2 million in 2008. It has brought much good to Cambodia – much needed foreign exchange, renewed national pride, interest in traditional arts as well as employment for the younger Khmers. This is a good thing since 50% of the population is less than 20 years old, and a lot of young people will enter the work force in the next 10 years.This will definitely boost  Cambodia's economy in the years to come

Cambodia’s economic growth has held up well despite domestic uncertainty and instability in neighboring countries. Real growth for 2014 is estimated to reach 7.2%, driven by the garment, construction, and services sectors. Bolstered by a strengthening global economy and with the expectation of renewed confidence and the return of political stability in July 2014 after a year-long political deadlock, Cambodia’s real economic growth rate for 2015 is expected to reach 7.5%.

Poverty in Cambodia has fallen sharply. World Bank estimates suggest that Cambodia achieved the Millennium Development Goal (MDG) of halving poverty in 2009. However, the vast majority of families who escaped poverty were only able to do so by a small margin. The poverty rate was 18.6% in 2012, with almost 3 million poor people and over 8.1 million who are near-poor. About 90% of them live in the countryside.

Human development, particularly in the areas of health and education, remains an important development priority for Cambodia. About 40% of children under five-years-old are malnourished and are short for their age.

Cambodia has made good strides in improving maternal health, early child care, and primary education programs in rural areas. The number of deaths per 100,000 live births decreased from 472 in 2005 to 206 in 2010, the under-five child mortality rate decreased from 124 per 1,000 live births in 1998 to 54 per 1,000 in 2010, and the net primary school admission rate increased from 81% in 2001 to 94.3% in 2012.

Cambodia has also been successful in preventing and treating HIV/AIDS. As of 2011, 95% of people infected with HIV/AIDS in Cambodia have access to antiretroviral treatment. This coverage rate is among the highest in the developing world.

Cambodia still faces a number of development challenges, including effective management of land and natural resources, environmental sustainability, and good governance. Corruption and weak public service delivery impede inclusive development. The key challenge going forward is to stimulate the agricultural and tourism sectors to once again become strong engines of growth supporting poverty reduction, as well as to expand and sustain growth in manufacturing including garments.

Cambodia Economy Profile 2014

Economy - overview

Since 2004, garments, construction, agriculture, and tourism have driven Cambodia's growth. GDP climbed more than 7% per year between 2010 and 2013. The garment industry currently employs more about 400,000 people and accounts for about 70% of Cambodia's total exports. In 2005, exploitable oil deposits were found beneath Cambodia's territorial waters, representing a potential revenue stream for the government, if commercial extraction becomes feasible. Mining also is attracting some investor interest and the government has touted opportunities for mining bauxite, gold, iron and gems. The tourism industry has continued to grow rapidly with foreign arrivals exceeding 2 million per year since 2007 and reaching over 3 million visitors in 2012. Cambodia, nevertheless, remains one of the poorest countries in Asia and long-term economic development remains a daunting challenge, inhibited by endemic corruption, limited educational opportunities, high income inequality, and poor job prospects. Approximately 4 million people live on less than $1.25 per day, and 37% of Cambodian children under the age of 5 suffer from chronic malnutrition. More than 50% of the population is less than 25 years old. The population lacks education and productive skills, particularly in the impoverished countryside, which also lacks basic infrastructure. The Cambodian Government is working with bilateral and multilateral donors, including the Asian Development Bank, the World Bank and IMF, to address the country's many pressing needs; more than 50% of the government budget comes from donor assistance. The major economic challenge for Cambodia over the next decade will be fashioning an economic environment in which the private sector can create enough jobs to handle Cambodia's demographic imbalance.

GDP (purchasing power parity)

$39.64 billion (2013 est.) 
$37.04 billion (2012 est.) 
$34.52 billion (2011 est.) 
note: data are in 2013 US dollars

GDP (official exchange rate)

$15.64 billion (2013 est.)

GDP - real growth rate

7% (2013 est.) 
7.3% (2012 est.) 
7.1% (2011 est.)

GDP - per capita (PPP)

$2,600 (2013 est.) 
$2,400 (2012 est.) 
$2,300 (2011 est.) 
note: data are in 2013 US dollars

Gross national saving

9.6% of GDP (2013 est.) 
9.1% of GDP (2012 est.) 
12% of GDP (2011 est.)

GDP - composition, by end use

household consumption: 74.7% 
government consumption: 7.7% 
investment in fixed capital: 16.4% 
investment in inventories: 2.1% 
exports of goods and services: 65.3% 
imports of goods and services: -66.2% 
(2013 est.)

GDP - composition by sector

agriculture: 34.8% 
industry: 24.5% 
services: 40.7% (2013 est.)

Population below poverty line

20% (2012 est.)

Labor force

7.9 million (2011 est.)

Labor force - by occupation

agriculture: 55.8% 
industry: 16.9% 
services: 27.3% (2010 est.)

Unemployment rate

0% (2011 est.) 
0.3% (2010 est.)

Unemployment, youth ages 15-24

total: 3.4% 
male: 3.5% 
female: 3.3% (2008)

Household income or consumption by percentage share

lowest 10%: 3% 
highest 10%: 37.3% (2007)

Distribution of family income - Gini index

37.9 (2008 est.) 
41.9 (2004 est.)


revenues: $2.685 billion 
expenditures: $3.1 billion (2013 est.)

Taxes and other revenues

17.2% of GDP (2013 est.)

Budget surplus (+) or deficit (-)

-2.7% of GDP (2013 est.)

Public debt

NA% of GDP

Inflation rate (consumer prices)

3.2% (2013 est.) 
2.9% (2012 est.)

Central bank discount rate

NA% (31 December 2012) 
5.25% (31 December 2007)

Commercial bank prime lending rate

13% (31 December 2013 est.) 
12.98% (31 December 2012 est.)

Stock of narrow money

$1.206 billion (31 December 2013 est.) 
$995.1 million (31 December 2012 est.)

Stock of broad money

$8.373 billion (31 December 2013 est.) 
$7.1 billion (31 December 2012 est.)

Stock of domestic credit

$5.705 billion (31 December 2013 est.) 
$4.801 billion (31 December 2012 est.)

Market value of publicly traded shares


Agriculture - products

rice, rubber, corn, vegetables, cashews, cassava (manioc, tapioca), silk


tourism, garments, construction, rice milling, fishing, wood and wood products, rubber, cement, gem mining, textiles

Industrial production growth rate

9.5% (2013 est.)

Current Account Balance

-$1.262 billion (2013 est.) 
-$1.208 billion (2012 est.)


$6.781 billion (2013 est.) 
$6.016 billion (2012 est.)

Exports - commodities

clothing, timber, rubber, rice, fish, tobacco, footwear

Exports - partners

US 32.6%, UK 8.3%, Germany 7.7%, Canada 7.7%, Singapore 6.6%, Vietnam 5.7%, Japan 4.7% (2012)


$8.895 billion (2013 est.) 
$7.965 billion (2012 est.)

Imports - commodities

petroleum products, cigarettes, gold, construction materials, machinery, motor vehicles, pharmaceutical products

Imports - partners

Thailand 27.1%, Vietnam 20.3%, China 19.5%, Singapore 7.1%, Hong Kong 5.8%, South Korea 4.3% (2012)

Reserves of foreign exchange and gold

$5.415 billion (31 December 2013 est.) 
$4.938 billion (31 December 2012 est.)

Debt - external

$4.912 billion (31 December 2013 est.) 
$4.567 billion (31 December 2012 est.)

Exchange rates

riels (KHR) per US dollar - 
4,037.6 (2013 est.) 
4,033 (2012 est.) 
4,184.9 (2010 est.) 
4,139 (2009) 
4,070.94 (2008)

Fiscal year

calendar year