Cambodia Economy

The development challenge facing Cambodia is to sustain growth, reduce poverty, and accelerate the completion of the reform agenda. To accomplish these medium term goals will require effective economic management and considerable inflows of external assistance in order to support the implementation of public investment priorities and raise the pace and consistency of structural reform. Moreover, mechanisms to reduce poverty and protect vulnerable groups from accelerated transformation must be put in place. The development needs of Cambodia have shifted from survival mode to a medium term strategic framework for rapid adjustment and growth supported by sound macro and sectorial policies, and complementary public investment and technical assistance programs.

Adjustment and growth, such are the objectives pursued by the MEF. It is important to strengthen the macroeconomic balances in order to allow for the healthy, sustainable growth of the economy. On this basis, sector-driven strategies tended to increase and diversify production, parallel with the budget strategy of reducing financial dependence and encouraging social progress.

The path covered in five years (1994-98), albeit one that shows deficiencies to be corrected and delays to be resolved, seems satisfactory, overall. Progress has been noteworthy and the results indicators positive mainly due to a good concurrence of external factors affecting economic development, and also to the clear direction given by national policies. Results Indicators - Positive Development

The outcomes of the results indicators appears to be positive, according to the information in Table below:

1. A real average annual growth rate of 5.2% for the period. Had it not been for the downturn in 1997 which will continue to make be felt to a lesser extent in 1998, the average annual growth rate could have reached 6.0%. In this regard, 1995 and 1996 have clearly very high scores, which were lining Cambodia up among the Asian dragons until the recent crisis occurred;

2. A per capita GDP on a constant growth curve, from US$241 in 1994 to US$303 in 1996, with a slight decline in 1997 ($290.9);

3. A CPI that broke free from the soaring increases of the previous years to stabilize from 1996 onwards at a about 9%;

4. A deficit in t he current balance excluding transfers, which is sustained at 14-15% of GDP, despite the. increase in imports due to investments;

5. Foreign exchange reserves that reached over two months of goods and services imports;

6. Foreign contributions that covered the gross deficit of the current balance on an annual average for 1994-97, in the amount of 134%, with the surplus helping to improve the gross foreign exchange reserves.

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