Tuesday, 07 April 2009
Written by Steve Finch
The Phnom Penh Post
CAMBODIA is set to be the country hardest hit this year by the global economic crisis in the Asia-Pacific region, the World Bank said today, placing the Kingdom among only four countries projected "to experience absolute increases in poverty".
In a report released today, the bank said that Cambodia - along with Malaysia, Thailand and East Timor - would see contractions in per capita income and therefore increased poverty, noting that the Kingdom's weaker GDP growth, which the bank again revised downwards to -1 percent for 2009, would slow poverty reduction across the region.
"Cambodia is the country with the largest projected increase in the number of poor people," the World Bank said.
It projected 200,000 additional people in the Kingdom this year would be pushed below the poverty line - defined by the bank as US$1.25 a day - compared to East Timor, where a further 25,000 were forecast to sink into poverty.
The World Bank in February said that Cambodia had reduced poverty from 45 percent to 50 percent in 1993-1994 - a figure that improved to around 30 percent by 2007.
The report also said that Cambodia would see the greatest GDP growth reversal in the region.
"An expansion of 10.2 percent in 2007 stands in stark contrast to a contraction of 1 percent projected for 2009," it said.
"The difference (11.7 percent) over two years is the largest in the region, and arises from a sudden drop in garment exports and tourist arrivals."
Neighbouring Thailand is projected to see the next biggest reversal at -7.6 percent over the same period, followed by Malaysia with -7.3 percent. GDP growth in developing East Asia, as a region, will see a -6.1 percent reversal in the same period.
The World Bank's growth projection for Cambodia is among the lowest so far after the London-based Economist Intelligence Unit forecast a 3 percent contraction in 2009 in its March outlook.
The International Monetary Fund last month estimated -0.5 percent growth and the Asian Development Bank last week said Cambodia's growth would slow to 2.5 percent.
The World Bank blamed a narrow economic base and over-dependency on exports for the country's projected economic reversal.
"The economy is affected by simultaneous declines in export orders for garments (which account for almost four-fifths of exports, and most of the shipments are to the US), a drop in construction, a collapse in private capital inflows and a sharp slowdown in tourist arrivals," it said.
"Credit growth that helped fuel the earlier expansion, including in real estate, has slowed sharply."
The World Bank noted that Cambodia had taken a number of measures to fight the financial crisis, including tax holidays until 2012 for foreign direct investors and larger aid for food supplies. "Efforts are underway to support agricultural producers and provide trade financing to exporters," it added.