IMF warns of risk to Cambodia growth if EU ends trade benefits

PHNOM PENH: Growth in Cambodia’s economy is expected to slow slightly next year, the International Monetary Fund (IMF) said on Friday, warning that it would be hit much harder if the European Union (EU) suspends preferential trade terms.

Without a suspension, the economy is expected to grow 6.8% in 2020, compared with 7% in 2019, driven by garment exports, the IMF said.

Private sector credit, increasingly concentrated in the real estate and construction sectors, has accelerated and is expected to grow around 28% in 2019.

The IMF urged Cambodia to take prompt action to moderate credit growth.

But withdrawal of the EU Everything But Arms (EBA) trade scheme with Cambodia could lead to “a 3 percentage point decline in GDP growth”, the IMF warned.

“Cambodia’s economic outlook is subject to significant downside risks. The ongoing EBA review by the EU – Cambodia’s primary export partner – could lead to a suspension of preferential trade access later next year, which could have a large negative impact on economic activity,” the IMF said.

Cambodia has benefitted from EBA since 2001, eliminating duties on almost all exports to the EU, which takes 40% of Cambodian exports.

The EU has threatened to suspend the benefits because of a crackdown on the opposition and the media by the government of authoritarian Prime Minister Hun Sen, who has ruled the country of 16 million for more than 34 years.

A final decision is expected in February. – Dec 27, 2019, Reuters

Subscribe and get top news delivered to your Inbox everyday for FREE