External factors still matter
In late January, the International Monetary Fund (IMF) predicted the country’s economic growth rate in 2024 to be 6.1%, due to the recovery in the regional and global economies.
IMF Asia and Pacific Director Krishna Srinivasan said the global economy is expected to grow by 3.1% in 2024, matching the growth rate in 2023.
He said global inflation is expected to fall from 6.8% in 2023 to 5.8% in 2024 and 4.4% in 2025, with a slight increase expected to 3.2% in 2025. he added.
For Asia, Srinivasan said the agency has revised its 2024 growth rate upwards, raising the regional forecast to 4.5% from 4.2% in October 2023.
“The external environment is more supportive, with strong growth in the US strengthening domestic resilience. Demand for technology, computers, electronics and optical products has increased recently. We are ready to contribute to two-thirds of the growth,” he explained.
He added that post-pandemic Asia has generally seen less steep price increases than other parts of the world. He said many regional central banks were poised to meet their inflation targets this year due to the particularly rapid development of emerging Asian economies.
Srinivasan also noted that stronger-than-expected policy support in China could boost demand and create positive spillovers.
However, he warned that financial conditions remain unstable and that heavily indebted industries and economies could come under pressure if conditions in the United States or Asia become tighter than expected.
“Given the region’s deep integration into global trade, the rising risk of geopolitical fragmentation is particularly burdensome for Asia. “We have already seen that the threat of higher transport costs strengthens trade risks,” he added.
“Now, what should policymakers prioritize? In our view, now is the time to strengthen the resilience of Asian economies. Fiscal consolidation restores buffers and protects debt sustainability. is key,” Srinivasan advised.
Increased vigilance in 2024
NBC President Chea Seri said in late January that the country’s outlook for 2024 remains uncertain due to global challenges such as geopolitical tensions and the risk of geopolitical fragmentation.
He noted that in major advanced economies, expectations that monetary policy would stabilize after inflation falls to target levels could affect financial asset transfers.
“Capital flows… may fluctuate depending on the pace of normalization, leading to uncertainty on investment flows and exchange rate pressures. In this situation, the Cambodian economy remains subject to high external risks. ,” she said.
Internal risks, such as a weak recovery in the construction sector and declining demand for real estate, could also pose challenges, Serei said.
He pointed out that the decline was mainly due to the real estate crisis and slowing economic growth in China, a major investor in Cambodia.
He said the low inflow of foreign investment into the sector is expected to lead to a reduction in income sources and impact domestic real estate demand.
“Despite these challenges, the Cambodian economy is optimally projected to grow at approximately 6.4% in 2024. This growth is primarily driven by continued growth in the services sector, particularly tourism, and manufacturing, It is driven by the recovery in industries such as agriculture,” while construction and real estate continue to experience low growth,” she added.
Farah stressed the need for heightened vigilance in 2024 amid growing challenges and risks at home and abroad.
He said these factors threaten the sustainability of the country’s development, including rising geopolitical, regional and global tensions, a slowdown in the global economy and a longer-than-expected tightening of monetary policy, particularly in the United States. , and the continued strength of the dollar.
He said these factors could affect capital investment and trade flows, driving continued increases in energy and commodity prices in international markets.
Mr. Farah emphasized that with the rise of a multipolar world and the fragmentation of economic and trade blocs, the geographical balkanization of economies is reducing participation in the globalization trend.
At the same time, he said the growing negative effects of climate change were worsening the situation.
“Cambodia will continue to face several domestic structural problems, including limited competition and a slow pace of economic diversification, in addition to continued heavy dependence on external demand,” he said. .
“Adherence to a defined macroeconomic framework is essential to support the effective implementation of key policy instruments. These measures have been set to achieve the goal of economic growth within 6.6%. “, Farah said.
“This is an essential basis for creating new jobs and higher earning opportunities for our people, especially young people, and increasing national budget revenues,” he added.
May Kunmakara
Phnom Penh Post
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