by Ly Sodeth, World Bank Cambodia

1. CAMBODIA'S ECONOMIC
GROWTH PATH AND
COMPETITIVENESS
Driving Forward on the Road to Recovery:
“Green, Social and Digital Challenges”
Harvard Microeconomics of Competitiveness
(MOC) Asia Conference
By Sodeth Ly
Sr. Economist
Friday, July 2, 2021

2. CAMBODIA SUSTAINED ROBUST GROWTH FOR MORE THAN
2 DECADES DURING THE PRE-PANDEMIC PERIOD…
1
Path: Cambodia has risen from a poverty-stricken nation tore by protracted civil war to a middle-
income country with a rapid structural transformation.
0
200
400
600
800
1000
1200
1400
1600
1800
0
2
4
6
8
10
12
14
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
GNIPC (US$, RHS)
GDP growth
Strong performance during the past 2 decades
(percent)
Source: Cambodian authorities and World Bank.
Lower-middle-
income economy
in 2015
0
10
20
30
40
50
60
70
80
90
100
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Taxes on products less subsidies
Source: Cambodian authorities.
The economy experienced rapid structural
transformation

3. 2
Overall performance: Sound macroeconomic management has attracted strong FDI inflows,
boosting foreign reserves. A success in PFM reform program boosted govt revenue and savings.
…THANKS TO ITS SOUND MACROECONOMIC MANAGEMENT
SUPPORTED BY A LIBERAL INVESTMENT AND TRADE POLICY
-
2
4
6
8
10
12
14
16
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
FDI (US$ million) FDI (% of GDP, RHS)
Rising net foreign direct investment inflows
Source: Cambodian authorities.
4.9 4.3 5.0 5.4
7.5
9.9
11.4
13.9
16.3
21.7
24.1
0
2
4
6
8
10
12
0.0
5.0
10.0
15.0
20.0
25.0
30.0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Gross international reserves (US$bln)
Gov't deposits (% of GDP)
GIR (months of prospective imports, RHS)
Source: Cambodian authorities.
Building up gross international reserves and government
deposits

4. 3
Weaknesses: Total factor productivity eased, while competitiveness has gradually eroded, thanks to
rapidly rising wages, narrow export base, and challenges in doing business reforms (plus its highly
dollarized economy). Contribution of capital stock to per capita value added growth increased.
HOWEVER, TOTAL FACTOR PRODUCTIVITY HAS MODERATED AS
COMPETITIVENESS ERODED…
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Real
Value
Added
Growth
Rate
(percentage
points)
Cambodia
Vietnam
Malaysia
Philippine
s
Indonesia
While remained strong, Cambodia’s growth remains
highly exposed to external shocks
Source: :Decomposition of Per Capita Value Added growth (Shapley method), World Bank.
44
64
37 39
25
32
29
13
31
3
33
48
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1995-2017 1995-2000 2000-2010 2010-2017
Share
of
Real
GDP
Growth
Capital Stock (α * gK) Labor ((1-α) * gL) Total Factor Productivity (gA) Total Period
Unlike Vietnam, Cambodia’s total factor productivity eased
Source: Decomposition of Per Capita Value Added growth (Shapley method), World Bank.
Note:
Cambodia Vietnam
0%
20%
40%
60%
80%
100%
2000-2017 2000-2005 2005-2010 2010-2017

5. 4
…WITH RISING PUBLIC AND PRIVATE INVESTMENT TO SUPPORT
ECONOMIC GROWTH
0
5
10
15
20
25
30
Private investment Public investment
Gross fixed investment rose
(percent of GDP)
Source: Cambodian authorities.
Note: e = estimates.
Remedial actions: It is necessary to further boost human capital, investment, and trade.
Source: October 2018 Cambodia Economic Update.

6. 5
Weaknesses: Employment growth deteriorated. Increasingly large number of jobs shed by the
agriculture sector, has resulted in migrant workers.
…EMPLOYMENT GROWTH HAS SIGNIFICANTLY DECELERATED…
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
0
2,000
4,000
6,000
8,000
10,000
12,000
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Share
of
Population
15+
1,000
people
Services Industry
Agriculture Population ages 15+
Employment Rate
Population and employment by major sector
Source: : Decomposition of Value Added Growth and Employment by Sector, World
Bank.
Decomposition of Growth in Employment, by Major Sector and
Period
Contribution to Gross Employment Growth
(percentage points) *
Sector 2000-2017 2000-2005 2005-2010 2010-2017
Agriculture -1.5 2.3 -1.0 -3.2
Industry 1.8 0.6 2.0 2.1
Services 2.9 1.1 3.2 3.2
Total 3.3 4.0 4.2 2.1
Residual -0.2 0.0 -0.3 -0.3
Total Growth 3.1 4.0 3.9 1.8
Source: Decomposition of Value Added Growth and Employment by Sector, World Bank.
Note: * Growth rates are weighted by the average share of total Employment in the beginning
and end years.

7. 6
AS CONSTRUCTION BOOM STALLED, PRODUCTIVITY MUST ONCE
AGAIN IMPROVE TO SUPPORT GROWTH
Coping measures: After contracting by 3.1 percent in 2020, the economy is projected to grow by 4
percent in 2021 (baseline). However, sustaining growth requires improvements in competitiveness by
diversifying and moving up value chains.
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
Historical average (10 years)
GDP growth (baseline)
GDP growth (downside)
Real growth (baseline and downside)
(percent)
Source: Cambodian authorities and World Bank staff projections.
Note: e = estimates; p = projections.
0
10
20
30
40
50
60
70
80
90
100
Jan-20
Feb-20
Mar-20
Apr-20
May-20
Jun-20
Jul-20
Aug-20
Sep-20
Oct-20
Nov-20
Dec-20
Jan-21
Feb-21
Mar-21
Apr-21
Garments & textiles
Footwear & travel goods
Electrical & vehicle parts
Agriculture & processing
Other products
Declining share of garment exports
(percent)
Source: Cambodian authorities.

8. OUTLOOK DURING THE PANDEMIC REMAINS HIGHLY UNCERTAIN,
BUT EFFORTS ARE MADE TO SUSTAIN A RECOVERY
7
Immediate action:
Accelerating
vaccination to reduce
numbers of
hospitalization and
deaths
Countercyclical
policy measures:
Continuing to
provide social
assistance, while
boosting investment
in soft & hard
infrastructure
Maintain macro-
financial stability
by closely monitor
vulnerabilities
arising from a
prolonged
property boom.
(Long-term global and regional challenges:
• Uncertain globalization
• Technological change
• Climate change

9. JUNE 2021 CAMBODIA ECONOMIC UPDATE
MACRO OUTLOOK (BASELINE)
8
2017 2018 2019 2020e 2021p 2022p 2023p
National Accounts and Prices
GDP at constant market prices (% change) 7.0 7.5 7.1 -3.1 4.0 5.2 6.0
Agriculture 1.7 1.1 -0.5 0.4 1.1 1.0 1.3
Industry 9.7 11.6 11.3 -1.4 6.7 7.4 8.5
Services 7.0 6.8 6.2 -6.2 2.6 4.8 5.4
Inflation, consumer prices (annual %, period average) 3.3 3.1 3.2 2.9 3.0 3.0 3.0
General Government (% of GDP)
Revenue and grants 21.9 23.8 27.0 24.1 22.7 23.1 23.8
Expenditure and net lending 22.7 23.4 25.5 26.8 26.0 27.1 27.0
Overall balance (including grants) -0.8 0.4 1.5 -2.7 -3.3 -4.0 -3.2
Foreign financing 3.0 2.5 3.1 4.8 4.2 4.1 4.1
Net domestic financing (from current savings) -1.6 -2.2 -3.8 -1.0 0.3 1.1 0.3
Amortization -0.6 -0.7 -0.8 -1.0 -1.2 -1.2 -1.2
Money and credit
Broad money (% change) 23.1 26.6 18.2 15.3 20.0 21.4 21.0
Credit to the private sector (% change) 17.4 27.4 27.0 17.7 23.2 25.8 28.1
External Sector (US$ million unless otherwise)
Exports (goods and services) 13,420 15,076 16,513 15,853 18,844 20,361 22,857
Imports (goods and services) 14,177 15,494 16,885 16,221 19,981 21,616 23,963
Foreign direct investment, net inflows 2,673 3,089 3,561 3,485 3,750 4,160 4,249
Gross official reserves 12,201 14,598 18,733 21,228 23,140 25,026 27,272
(months of imports) 6.3 6.3 9.7 10.4 9.5 9.3 9.0
Current account (percent of GDP) -9.7 -8.9 -9.7 -9.9 -9.8 -10.2 -9.7
Exchange rate (Khmer riel per US$ average) 4,062 4,067 4,070 4,077 4,070 4,050 4,050
Total public debt (% of GDP) 30.2 28.7 28.1 34.6 35.2 36.9 36.4
Memorandum items:
Nominal GDP, US$ million 22,115 24,476 27,030 25,484 27,215 29,749 32,524
Source: Cambodian authorities and World Bank staff estimates and projections.
Note: e = estimates; p = projections.