Ukraine crisis new ‘burden’ for economy: PM
Ukraine crisis new ‘burden’ for economy: PM
Cambodia continues to “vigorously” implement its economic policies to control inflation and maintain macroeconomic stability and purchasing power of the local currency, even as the Russia-Ukraine conflict and persisting effects of the global health crisis hamper national and global economic growth, according to Prime Minister Hun Sen.
The premier was speaking on June 13 at the closing and graduation ceremony for the 2020-2021 training course of the Royal School of Administration, which also marked the opening for the 2022 programme.
“We must be prepared to accept the facts concerning the economic downturn stemming from both Covid-19 and the Russo-Ukrainian war. This is something that we must work together on to maintain good macroeconomic stability, prevent inflation, and maintain the purchasing power of the riel.
“Our economy has just recovered, after Covid, but it is unbelievable that the Russian-Ukrainian war has begun to put yet another burden on countries around the world,” he said.
He said that the current situation has prompted major economic institutions such as the International Monetary Fund (IMF) to downgrade their outlooks for countries across the board, including Cambodia.
“I’ve told all our colleagues not to worry too much about any issues related to these assessments, the most important thing is to [find out] what we really need to do: our efforts [should be directed at] maintaining macroeconomic stability, curbing inflation, maintaining the purchasing power of our riel,” Hun Sen said.
Although maintaining that the Kingdom is under no significant risk of economic collapse, the premier encouraged Cambodians to keep building their savings to better deal with the present circumstances. He also affirmed that new safeguards were in the pipeline to shoulder some of the financial risks that may arise from the current crises.
IMF deputy managing director Kenji Okamura told The Post in mid-May that the fund projects that the Cambodian economy would grow at around five per cent this year, before accelerating to six-to-6.5 per cent annually in the medium term. “This growth rate is relatively high, even for a developing country.
“The Cambodian recovery is so far being driven mainly by external demand for manufactured goods, particularly garments and footwear. The overall outlook is positive, but we see some challenges. The most pressing challenges stem from global headwinds. Food and energy prices were already increasing.
“The war in Ukraine adds to those pressures and creates new uncertainty about consumer demand in Europe, one of the largest export markets for Cambodia. Recent lockdowns in key manufacturing and trade hubs in China will likely compound supply disruptions elsewhere.
“On the domestic side, while credit growth has softened recently, we see some risks associated with the financial system having too many loans concentrated in the real estate and construction sector. So, the country needs to build buffers pre-emptively and to contain these risks in the financial system before they materialise.
“Fortunately, Cambodia’s foreign exchange reserves are comfortable and should provide sufficient cushion against external shocks in the near term. That said, these global headwinds complicate policy-making in Cambodia – they make it harder to judge how much support is still needed for the economy. The priority is still to protect the most vulnerable segments of the population,” he said.
The prime minister noted that the first quarter of this year brought generally positive results with respect to the economy and food security: exports posted substantial growth, paddy production was in surplus, while animal husbandry and aquaculture production were also “sufficient”.
However, if the knock-on effects of Covid-19 continue and the Ukraine crisis remains unresolved, the looming food crisis could escalate into a global catastrophe, he said. “We have to be ready now to respond to possible upcoming food crisis situations.”
Hun Sen pointed out that during the pandemic, the government has spent about $40 million per month on a cash transfer programme to support vulnerable households.
