Cambodia’s Economy Under Siege: Financial Crimes Threaten Global Growth

Introduction

The Kingdom of Cambodia has been a shining star in the Southeast Asian economy, boasting an average annual growth rate of 7.6 percent between 1995 and 2019. However, the COVID-19 pandemic brought the first economic contraction in 25 years, with the country’s GDP shrinking by 3.1 percent in 2020.

Challenges to Recovery

• The global economic landscape is marked by weak demand, financial stress, and elevated debt, all of which pose significant risks to Cambodia’s growth prospects.
• The country’s banking system has been grappling with a rise in non-performing loans, driven by the ongoing housing market correction. This development could have far-reaching consequences for macro-financial stability.

Poverty Rates on the Rise

The COVID-19 pandemic had a devastating impact on poverty rates in Cambodia. The World Bank estimates that inflation could increase poverty levels by 4 percentage points from the national poverty rate of about 18 percent, measured in 2019/20. This trend is a stark contrast to the decade-long decline in poverty rates prior to the pandemic.

Efforts to Mitigate Poverty

Efforts to mitigate the impact of poverty have been underway since June 2020, with the government launching social assistance programs for poor and vulnerable households. However, these measures have only managed to moderate income losses, leaving many still struggling to make ends meet.

Education: A Key Driver of Growth

Cambodia’s education sector has made significant strides in recent years, with increased enrollment rates and improved access to learning. However, the quality of education remains a concern, with many students lacking foundational skills in literacy and numeracy.

• The impact of this shortage is far-reaching, as it threatens to hinder Cambodia’s economic growth prospects.
• With a large proportion of its workforce failing to acquire basic skills, the country risks being unable to contribute to regional or global trade, ultimately perpetuating poverty and underdevelopment.

Reforms Needed for Sustainable Growth

Cambodia’s path forward requires a comprehensive approach that addresses infrastructure gaps, promotes entrepreneurship, and builds new skills to address emerging labor market needs. The government must also prioritize accountable and responsive public institutions to ensure the delivery of quality services.

• Investing in human capital will be crucial in achieving Cambodia’s ambitious goal of reaching middle-income status by 2030.
• By harnessing the vast potential of its young learners, the country can create a more competitive and sustainable economy that benefits all segments of society.