IMF revises Cambodia’s GDP up 35% with 2014 base
IMF revises Cambodia’s GDP up 35% with 2014 base
The International Monetary Fund (IMF) in its World Economic Outlook for April 2024 revealed Cambodia’s new GDP figures by taking 2014 as the base year for the calculations instead of 2000, showing the economy 35 percent larger than previous GDP calculations indicated.
Accordingly, Cambodia’s GDP for 2023 is $41.9 billion, said Mekong Strategic Capital (MSC) in a note on the IMF’s decision.
As per the Asian Development Bank (ADB) figures, the Kingdom’s GDP for 2023 was $31.9 billion and the difference is the result of the rebasing carried out in IMF figures.
Meanwhile, the IMF Outlook predicted Cambodia’s real GDP to grow by six percent this year and 6.1 percent in 2025.
According to MSC, this rebasing is the result of a well overdue but rigorous process by the National Institute of Statistics (NIS) to estimate the size of the Cambodian economy more accurately and this process was reviewed and accepted by the IMF.
It said that one of the main drawbacks of the previous GDP figures was the overestimated contribution of agriculture to the economy (which is very low growth) over the years. They also underestimated the higher growth of the industry and services sectors by sticking to 2000 as the base year.
“It is also worth noting that these new estimates are only using 2014 as a base year, which would also be well out of date now. We believe that an up-to-date estimate given the ongoing transformation of the economy could see the economy being 45-50 percent bigger, rather than 35 percent,” it said.
GDP calculations are carried out using a range of statistical tools. Until now, the NIS had been using 2000 as the base year for these estimates, but the economy was entirely different 23 years ago.
“They (NIS) were applying a percentage growth estimate to a percentage growth estimate, for 23 years. As a result, the previous GDP estimates didn’t properly reflect the structural transformation in the economy, inflation impacts, and technological progress that we’ve seen since then,” the note said.
Stephen Higgins, the Managing Partner of Mekong Strategic Capital, told Khmer Times that the recommended best practice is to do the rebasing at least every five years. “Until this last rebasing exercise, Cambodia hadn’t done it since 2000, so it was very out of date,” he said.
Countries are revising and rebasing their GDP calculations all the time. It doesn’t normally result in as large a revision as this, although sometimes it is much larger.
Just under 10 years ago, there were some very large revisions amongst African countries, with Nigeria increasing 89 percent, Ghana up 62 percent, Tanzania up 25 percent, and Kenya up 24 percent. Given the base year for Cambodia had been 23 years old, it’s not surprising that we’re seeing a big change here, the note said.
The impact will more be around perception, but some of those perceptions really matter. For example, Cambodia’s high private debt to GDP ratio will fall from around 180 percent to a more comfortable 142 percent at the end of 2023 with the new calculations. It will also make Cambodia’s already very low public debt fall to even lower levels.
According to the MSC note, the GDP per capita will also be around 35 percent higher, which puts Cambodia around five years closer to achieving the upper middle-income status. This will impact how investors and others perceive Cambodia – a bigger economy is generally more attractive to invest in than a smaller one, all other things being equal.
But this can also impact Cambodia’s taxation levels. The General Department of Taxation (GDT) has been lauded for increasing Cambodia’s tax base as a percentage of GDP. But the taxation levels also could appear 35 percent smaller which could give ground for further taxation.
