PHNOM PENH, May 29, 2020- As a result, the economy in 2020 is expected to register its slowest growth since 1994, contracting by between -1 percent and -2.9 percent, according to Cambodia in the Time of COVID-19, the World Bank’s latest Economic Update for Cambodia.
Poverty in 2020 could increase among households involved in key sectors like tourism, construction, trade, manufacturing and the garment industry by between 3 to 11 percentage points higher than at baseline, or in the absence of COVID-19. The fiscal deficit could reach its highest level in 22 years.
The collapse of growth drivers has hurt economic growth and put at least 1.76 million jobs at risks. The report also warns that capital inflows are tapering off, which in turn is triggering the easing of real estate market prices, likely ending the construction boom. With the current large outstanding credit to the construction, real estate, and mortgage sector, nonperforming loans could rise.
In response to the COVID-19 shock, the report recommends policy options that aim at providing urgent economic relief and public health protection in the immediate term, underpinning an economic recovery in the short term, and fostering macro-fiscal and social resilience in the medium term.
“The global shock triggered by the COVID-19 pandemic has significantly impacted Cambodia’s economy,” said Inguna Dobraja, World Bank Country Manager for Cambodia. “The World Bank is committed to helping Cambodia deal effectively with the COVID-19 crisis and strengthen the economy for recovery and future resilience.”
The report also includes a special focus section on the importance of quality of education as a key to human development and sustainable growth in Cambodia. Spending on education in nominal terms nearly tripled from $343 million in 2014 to $848 million in 2019, with a significant portion of that increase going to teachers’ salaries. However, achieving education quality in public schools remains a critical challenge.
The special focus looked at two school models-New Generation School and School Based Management-because they have shown promising results in education quality. Among the important factors contributing to improved student learning outcomes in these two models are giving schools a level of autonomy to manage operations along with higher accountability, use of performance-based management, and emphasis on teacher quality.
The special focus also highlighted key policy recommendations to improve the quality of education in Cambodia such as strengthening accountability in public schools, linking salary increase and promotion to performance, and further upgrading the capacity and quality of teachers.
The Cambodia Economic Update is a biannual report that provides up-to-date information on short- and medium-term macroeconomic developments in Cambodia.