Cambodia Economy Overview in 2021 by World Bank

Over the past two decades, Cambodia has undergone a significant transition, reaching lower middle-income status in 2015 and aspiring to attain upper middle-income status by 2030. Driven by garment exports and tourism, Cambodia’s economy has sustained an average real growth rate of 7.7 percent between 1998 and 2019, making it one of the fastest-growing economies in the world.

The global shock triggered by the COVID-19 pandemic significantly impacted Cambodia's economy in 2020 at a time when Cambodia also faces the partial suspension of preferential access to the EU market under the "Everything but Arms" initiative. The outbreak caused sharp deceleration in most of Cambodia's main engines of growth—tourism, manufacturing exports, and construction—which together accounted for more than 70 percent of the country’s growth in 2019 and almost 40 percent of paid employment. The economy in 2020 registered negative growth of -3.1 percent, the sharpest decline in Cambodia's recent history. Cambodia's economy is expected to start recovering this year, growing at 4 percent, helped by an improving external environment and unprecedent government support. The COVID-19 outbreak and slow recovery in global economic activity, alongside prolonged financial market turmoil, poses risks to Cambodia’s growth outlook. 

According to official estimates, the poverty rate in 2014 was 13.5 percent compared to 47.8 percent in 2007. About 90 percent of the poor live in the countryside. While Cambodia achieved in 2009 the Millennium Development Goal (MDG) of halving poverty, the vast majority of families who escaped poverty did so by a small margin. Around 4.5 million people remain near-poor and vulnerable to falling back into poverty when exposed to economic and other external shocks. Poverty has increased due to the COVID-19 pandemic. More than 710,000 households (2.8 million people) received cash transfers during the COVID-19 in January 2021, while only 560,000 households (2.3 million people) were eligible in early June 2020. This implies that at least 150,000 households (0.5 million people) have been identified as newly poor between June 2020 and January 2021.

To monitor the household-level impacts of COVID-19 in Cambodia, the World Bank and the National Institute of Statistics designed and are conducting high-frequency household phone surveys. The fourth round of surveys completed in December 2020 and January 2021, showed that 72 percent of respondents were employed, reaching similar levels as in May and August 2020 but remaining below its pre-pandemic level when 82 percent of respondents were working. The December 2020 survey also showed that 50 percent of households reported a decline in household income relative to the previous round.

Health and education, especially quality and equitable access, remain important challenges and development priorities.

Cambodia has made considerable strides in improving maternal and child health, early childhood development, and primary education in rural areas. The maternal mortality ratio per 100,000 live births decreased from 472 in 2005 to 170 in 2014; the under-five mortality rate decreased from 83 per 1,000 live births in 2005 to 35 per 1,000 live births in 2014; and infant mortality rate decreased from 66 per 1,000 live births in 2005 to 28 per 1,000 live births in 2014. Despite the progress in health and education outcomes, human capital indicators lag behind lower middle-income countries. A child born in Cambodia today will be only 49 percent as productive when grown as she could be if she enjoyed full quality education, good health, and proper nutrition during childhood. An estimated 1 in 3 children under the age of five suffer from stunting and only 36 percent of children between three and five years old are enrolled in early education. While net enrollment in primary education increased from 82 percent in 1997 to 97 percent in 2020, lower secondary completion rates, are at 45 percent in 2019, which is significantly lower than the average for lower middle-income countries. As of 2017, 21 percent of Cambodia’s population (3.4 million people) did not have access to improved water, and 34 percent (5.4 million people) did not have access to improved sanitation.

Key reforms are needed for Cambodia to sustain pro-poor growth, foster competitiveness, sustainably manage natural resource wealth, and improve access to and quality of and equitable access to public services. Cambodia continues to have a serious infrastructure gap and would benefit from greater connectivity and investments in rural and urban infrastructure. Further diversification of the economy will require fostering entrepreneurship, expanding the use of technology and building new skills to address emerging labor market needs. Accountable and responsive public institutions will also be critical to meeting the evolving needs of citizens and the private sector.  And quality of human capital will be of utmost importance to achieve Cambodia’s ambitious goal of reaching middle-income status by 2030.

Source: worldbank