Hit by the global economic slowdown and the loss of E.U. trade benefits, Cambodia’s economy is projected to contract 2 percent this year, with the World Bank warning that poverty rates will be on the rise regionwide.
In a new regional report on Asia-Pacific’s response to Covid-19 and the ensuing downturn, the World Bank said GDP growth would be hurt by record regional drops in exports and imports, expected to contract 12.6 percent and 8.9 percent this year, respectively.
Like other countries in the region, Cambodia has been heavily impacted by the global economic downturn, as the country’s key sectors — tourism, construction and retail exports — rely on the world economy and contributed to 70 percent of GDP growth and 39 percent of paid employment last year. Cambodia’s trade deficit will increase from 10 percent of GDP last year to 12.8 percent, the bank projected.
The bank said micro and small businesses were especially hit hard, with sales halving on average. Large businesses have fared relatively better, with sales down 37 percent in Cambodia, it said.
“Larger firms seem to be recovering faster than SMEs — with SMEs both more vulnerable to the crisis and less able to adapt by going digital,” the report said about the region. “Both wage employees and those working in family businesses, many of which are in the services sector, have experienced significant income declines.”
This has meant 79 percent of households in Cambodia have lost earnings, according to the report. In a survey, 12 percent of 700 household respondents said they had stopped working, and 6 in 10 households reduced food and nonfood consumption.
Regionally, poverty could increase for the first time in 20 years. Before Covid-19, 33 million people were forecasted to escape poverty in the region this year, but now, outside of China, the number of people in poverty is expected to rise between 9.5 and 12.6 million, the report said.
In its May update, the World Bank projected that Cambodia’s GDP would plummet to negative rates for the first time since 1994, dragging national employment rates and government revenue along with it.
Additional reporting by Michael Dickison