The Cambodian economy showed resilience during the global recession and is expected to clock a growth rate of 5 percent in 2022 backed by over 37 percent growth in its garment exports in the first half of 2022 according to official reports.
The growth would have been higher had the export apparel not slowed down in European and United States markets in the second half. Still, 5 percent is decent growth and experts are expecting that after gradual recovery the GDP growth would touch 5.4 percent next year. The country is dependent on garment exports for higher growth. After clocking 37.7 percent growth in the first half Cambodian garment exports declined to 18.3 percent in July and slumped to only 1.5 percent in August. The exports are expected to remain under pressure for the rest of the year. The imports on the other hand have increased due to high petroleum rates and the basic textiles that Cambodia imports for value addition.
Cambodia generates most of its FDI from China and the downturn in its economy could slow FDI. The tight border controls in China due to the pandemic are likely to cause supply chain constraints. Cambodia’s garment sector would be severely affected as more than 60 percent of its textile inputs are outsourced from China.
In 2020, COVID-19 restrictions also caused disruption in the garment production chain. The garment exports declined at that time as well. Before 2020, a quarter of total imports of inputs were used in the production of garments. Higher energy prices shot the inflation in Cambodia to 7.8 percent by June 2022 but the inflation is declining and it is expected to average 5.3 percent in 2022 and 3 percent in 2023.
