Market Research Logo

Cambodia Country Risk Report Q4 2017

Cambodia Country Risk Report Q4 2017

Core Views

Our real GDP forecasts for Cambodia assume a continuation ofstrong growth, averaging 6.4% over the next decade. Still-strong demographictrends, the potential for increased integration into ASEANmanufacturing supply chains, and a high level of competitiveness inthe tourism sector are the main positive factors. However, there arealso a number of major structural headwinds facing the economy,not to mention the cyclical headwinds such as the ongoing creditboom.

The recent arrest of opposition leader Kem Sokha and the closureof independent newspaper Cambodia Daily reflect strongman PrimeMinister Hun Sen's increasingly authoritarian stance on oppositioncriticism ahead of the 2018 general election. We maintain our longheldview that Hun Sen is not ready to give up power, regardless ofthe upcoming election outcome, which poses risks to the businessenvironment due to the potential for foreign sanctions and garmentsector protests. We have downgraded our political risk indices onceagain to reflect recent developments.


Executive Summary
Core Views
Key Risks
Chapter 1: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Growth Outlook
Maintaining 6% Growth To Become Increasingly Difficult
Our real GDP forecasts for Cambodia assume a continuation of strong growth, averaging 6.4% over the next decade. Stillstrong
demographic trends, the potential for increased integration into ASEAN manufacturing supply chains, and a high level of
competitiveness in the tourism sector are the main positive factors. However, there are also a number of major structural headwinds
facing the economy, not to mention the cyclical headwinds such as the ongoing credit boom.
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
Outlook On External Position
Wide Current Account Deficit To Narrow Gradually
Cambodia's high current account and NIIP deficits reflect the country's reliance on foreign investment to support growth amid a low
domestic savings rate. As domestic savings increase this should reduce the country's external borrowing needs.
TABLE: MAIN EXPORT AND IMPORT PARTNERS
TABLE: MAIN EXPORTS AND IMPORTS
TABLE: CURRENT ACCOUNT BALANCE FORECASTS
Monetary Policy Framework
Dollarization To Keep Inflation Subdued
We forecast inflation to remain low over the next decade as the highly dollarized nature of the Cambodian economy will impose limits on
government deficit spending and money supply growth. We forecast consumer price inflation to average 3.8% per year over our forecast
period, compared to 4.8% over the past decade.
TABLE: MONETARY POLICY FORECASTS
Structural Fiscal Position
Solid Fiscal Outlook Despite Public Sector Wage Bill
We do not expect to see significant deterioration in Cambodia's fiscal accounts as strong revenue mobilisation and rapid real GDP
growth will help to offset the high public sector wage bill. The highly dollarized nature of the economy and thus the lack of demand for
local currency government debt will limit the ability of the government to run persistently large fiscal deficits.
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES
TABLE: FISCAL AND PUBLIC DEBT FORECASTS
Chapter 2: 10-Year Forecast
The Cambodian Economy To 2026
Agriculture, Textiles, And Tourism To Power Growth
We are forecasting a 6.4% annual compound average real GDP growth rate over the next decade (versus 7.7% over the past two
decades), due to a rising working-age population and increases in labour productivity. Agricultural exports, textiles, and tourism will
continue to be the main pillars of growth, helping GDP per capita increase from an estimated USD1,269 in 2016 to USD2,943 by 2026.
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Contents
Chapter 3: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics
Downgrading Risk Indices Amid Intensified Crackdown
The recent arrest of opposition leader Kem Sokha and the closure of independent newspaper Cambodia Daily reflect strongman Prime
Minister Hun Sen's increasingly authoritarian stance on opposition criticism ahead of the 2018 general election. We maintain our longheld
view that Hun Sen is not ready to give up power, regardless of the upcoming election outcome, which poses risks to the business
environment due to the potential for foreign sanctions and garment sector protests. We have downgraded our political risk indices once
again to reflect recent developments.
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
Addressing Corruption And Inequality Will Be Key To Stability
Cambodia's long-term political outlook largely depends on the ruling Cambodian People's Party (CPP)'s ability to address widespread
corruption and income inequality, which have been fuelling public dissent against the government in recent years. T he recent rise in
support for the main opposition party shows that the CPP's grip on power is waning, which could lead to heightened political uncertainty
over the coming years.
Chapter 4: BMI Global Macro Outlook
As Good As It Gets?
TABLE: GLOBAL MACROECONOMIC FORECASTS
TABLE: DEVELOPED STATES – REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS – REAL GDP GROWTH, % y-o-y
TABLE: CAMBODIA – MACROECONOMIC DATA & FORECASTS

Download our eBook: How to Succeed Using Market Research

Learn how to effectively navigate the market research process to help guide your organization on the journey to success.

Download eBook

Share this report