On the back of rising private sector confidence, Cambodia's economy is expected to post 9% growth this year, the International Monetary Fund's managing director Rodrigo de Rato said August 1.
But immediate reform is needed in governance and the banking sector if the country hopes to see its economy continue to expand. "These are the immediate challenges," he said. "The only alternative for reducing poverty is sustained growth over time," he added.
This year's growth estimate represents a dip of more than a point from last year's growth of 10.8%, and is significantly down from the IMF's 2005 growth figure of 13.5%. The country's economy is still too narrowly based on the garment and tourism sectors, the IMF said in its 2007 report on Cambodia.
While both industries continue to gallop -- six-month tourism figure rose 20% over the same period last year -- they are increasingly vulnerable as Cambodia enters the global market.
Analysts have warned that the key garment sector, which accounts for some 80% of Cambodia's export earnings, could nosedive following the end of U.S. and EU safeguards against Chinese textiles which are due to expire at the end of 2007.
De Rato said that the recent discovery of oil and gas reserves off Cambodia's coast was a "positive thing" that could bring much needed revenue to the impoverished country. Hundreds of millions of barrels are estimated to lie in off-shores fields, and at least half a dozen foreign firms are negotiating with the government for exploration rights. But he also warned that a solid legal framework was needed to handle the sudden influx of cash that an oil rush could bring.
Copyright Agence France-Presse, 2007