Cambodia: Macroeconomic Indicators and Prospects

Transcription

1 Cambodia: Macroeconomic Indicators and Prospects Presentation by Mr. John Nelmes IMF Resident Representative in Cambodia at the Cambodia Outlook Conference March 17, 21 The views expressed in this presentation are those of the author,, and not necessarily those of the IMF, its Executive Board or Management. Outline The Global Economy: A multi-speed recovery Cambodia s s Recent Indicators: Where are we now? Prospects and Policy Options: Where are we going, and which road to take? 1

2 Following a deep recession, global growth is recovering and trade has rebounded. 1 Real GDP Growth (Percent; quarter on quarter annualized) Merchandise Exports (Annualized percent change of 3mma over previous 3mma) 1 World Emerging 3 2 World - Emerging Industrial Advanced Jan- Jan-2 Jan- Jan- Jan Asia is leading the global recovery, thanks to strong domestic demand and openness to recovering trade Real GDP Growth (q/q, SAAR; percent) Export Dependence and Growth 12 Expected change in real GDP growth from 29 to 21 1 ASEAN- Mongolia Cambodia NIEs LICs Sri Lanka Papua New 2 Lao Guinea Nepal P.D.R. Vietnam Bangladesh Export-to-GDP ratio in 2 2

3 supported by an unprecedented easing of monetary and fiscal policy. Asia: Nominal Policy Rates (median ; percent; peak of the cycles=zero) Fiscal Impulse: 29 (percent of GDP) Advanced economies have exited recession but output levels are well below pre-crisis. Recovery will be sluggish by historical standards due to high unemployment... Advanced Economies Real GDP Index; 27=1 (RHS) Advanced Economies Unemployment Rate (percent) 9 7 Q/Q percent change (LHS) 27 9: Q3 27 9: Q3 3

4 ...weak credit growth as banks repair balance sheets, and high public debt levels. Private Sector Credit Growth (3-month percent change of 3mma) Public Debt (percent of GDP) G-2: Private Sector Credit Growth (3-month percent change of 3-mma, SAAR) United States Euro area Advanced economies World - -1 Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan-9 Feb-9 Mar-9 Apr-9 May-9 Jun-9 Jul-9 Aug-9 Sep-9 Oct-9 Nov-9 Dec-9 Emerging and Developing economies The global recovery is off to a stronger start than expected earlier, though at different speeds across regions. IMF World Economic Outlook (annual percent change) Projection World output Advanced economies United States Euro area Japan Asian NIEs (1) Emerging and developing economies China India Asean- (2) Brazil Russia (1) Hong Kong SAR, Korea, Singapore, Taiwan Province of China. (2) Indonesia, Malaysia, Philippines, Thailand and Vietnam

5 The IMF is supporting its member countries through the crisis and has delivered unprecedented financial assistance. 1 IMF Programs and Precautionary Credit Lines, ARG ARG Percent change in real GDP 1/ ARG KOR THA IDN PHL UKR IDN BRA MEX RUS IDN COL TUR ARG BRA TUR URY BRA COL TUR IRQ Size of bubble = access in percent of quota PAK SRI COL MNG POL BLR SER GEO BIH GTM HUN SYC ISL UKR ARM MEX ROM percent of quota LVA / Maximum cumulutive decline in three years from program inception Cambodia: Economic Indicators Decline of economic activity was broad based in 29, but agriculture a bright spot Recession appears to have bottomed out late last year, a recovery is now underway 29 growth negative 2½2 percent Inflation down significantly

6 The garment sector was hit by the fall in U.S. demand, tough regional competition will make for a challenging recovery. Garment Exports and US Retail Clothing Sales (3 month moving average Y/Y, in percent) US Garment Imports Market Share (3mma, in percent, China left) Jan-7 May-7 Sep-7 Jan- May- Sep- Jan-9 May-9 Sep-9 Garment export volumes (left) US clothing sales value (right) Jan-1-9 Dec- Apr-7 Aug-7 Dec-7 Apr- Aug- China Bangladesh Dec- Apr-9 Aug-9 Dec-9 Cambodia Vietnam Tourism arrivals are recovering, though tourists spent a lot less money last year. Total Tourist Arrivals and Angkor Wat Revenue (Year-on-year growth, in percent) Tourist Arrivals and Per-capita GDP of Tourist-Source Countries (29 y/y growth in percent, and thousands of US dollars) Jan- Jun- Nov- Apr-7 Sep-7 Feb- Jul- Dec- May-9 Oct-9 Angkor W at revenue YTD (right scale) Tourist arrivals YTD Tourist arrivals (left scale) Angkor wat revenue (right scale) 1/ -7 Vietnam Laos Malaysia Japan Australia China Taiwan Europe Americas Korea Thailand Day visitors Philippines

7 Investment approvals are down sharply, but a shift in the composition bodes well for boosting longer-run run growth. 2 Investment Approvals US$ 1. billion (chart excludes 3 tourism approvals over US$1 b.) 29 Investment Approvals US$. billion (chart excludes 1 tourism approval over US$1 b.) Infrast. Garment Agriculture Garment Manu. Agriculture Infras t. Const. Tourism Tourism Manu. Const. Construction activity is slowly recovering after a deep downturn, retail trade is also rebounding. 2-2 Construction-Material Imports (Year-on-year growth 3mma and 29 average) Steel Construction material 29 averages Imports of Cars of Motorbikes (Year-on-year growth 3mma and 29 average) Cars Motorcycles - - Jan- Cement May- Sep- Jan-9 May-9 Sep Jan- May- Sep- Jan-9 May-9 Sep-9 29 averages 7

8 Credit growth is inching upwards after a sharp slowdown from excessive expansion. Private Sector Loan and Deposit Growth, and Loan/Deposit Ratio (Year-on-year growth, and percent, respectively) Jan-7 Mar-7 May-7 Jul-7 Sep-7 Nov-7 Jan- Mar- May- Jul- Sep- Nov- Jan-9 Mar-9 May-9 Jul-9 Sep-9 Nov-9 Jan Loan-to-Deposit Ratio Deposits y/y Loans y/y Agriculture remains a bright spot, due in part to productivity improvements and infrastructure development. Paddy Rice Production 2-9 (Rainy and dry seasons, tonnes) Source: MAFF

9 Overall 29 GDP growth is estimated at negative 2½2 percent, agriculture and public spending grew, but most other key components contracted. Real GDP Growth by Sector and Share (Year-on-year growth, and percent of total, respectively) Agriculture Public admin - -1 Hotels&restrants Finance Retail trade -1-2 Garments Construction Real estate Inflation fell sharply with the contraction in demand, though higher commodity prices and the expansionary budget have exerted upward pressure more recently. Inflation and Riel in Circulation (Year-on-year percent change) Headline inflation Underlying inflation (excluding food and transport) 1/ Riel in circulation growth Jan- Jul- Jan- Jul- Jan- Jul- Jan-7 Jul-7 Jan- Jul- Jan-9 Jul-9 Jan-1 1/ Excludes food, beverages, and tobacco; and transportation and communication components of the consumer price index. 9

10 Prospects and Policy Options Growth will turn positive in 21, over percent, supported by the global recovery Modest fiscal consolidation is key for macroeconomic stability Safeguarding the health of the financial system will support access to finance Deeper structural reforms would boost long-run growth potential Growth should exceed percent in 21, supported by steady agriculture improvements, an improved global outlook, and a recovery of domestic demand Real GDP Growth by Sector and Share (Year-on-year growth, and percent of total, respectively) Agriculture 1 Hotels&rest'nts Retail trade Garment s - -1 Real estate Construction

11 21 budget deficit of ¼ percent of GDP the lower 21 deficit is appropriate, but financing from the domestic banking system should be avoided Fiscal Deficit and Financing (in percent of GDP) Est. 21 Budget - Net domestic financing Net external loans Grants Fiscal deficit (excluding grants) Commendable revenue performance in 29, further efforts in 21 would eliminate domestic financing needs and open space for additional high-priority development spending 2 Government Revenue (in percent of GDP) 2 2 Government Spending (in percent of GDP) Est. 21 Budget Domestic taxes Trade-related taxes Other revenue Asian LICs 2 29 Est. 21 Budget Asian LICs Wage expenditure Non-wage current expenditure Capital expenditure 11

12 Continued strong supervision of the banking sector and enforcement of prudential regulation will ensure stability and facilitate greater access to finance Banking system now highly liquid, but profits are being squeezed by negative interest margins. Caution to avoid another lending boom, to mitigate the risks of a later bust Profitability and Interest Margin (in percent) Dec 2 Mar 2 Sept. 2 Mar 29 Sept. 29 Return on equity 3-month SIBOR minus dollar deposit rate Over the longer-run, run, sustained robust growth will enable Cambodia to move up into middle-income income status Per Capita GNI (U.S. dollars, 2) Per Capita GNI: Illustrative Medium-Term Growth Paths (U.S. dollars) Cambodia Lao PDR Vietnam Philippines Indonesia Thailand Malaysia ASEAN (ex Brunei&Myanmar ASEAN with 3% real growth IDA Threshold with 2% growth Cambodia with 7% real growth Cambodia with % real growth Source: World Bank Source: World Bank, and IMF staff calculations 12

13 Emphasis on raising the quality of infrastructure and human capacity are fundamental to move up within ASEAN Infrastructure Quality (rank among 133 countries, Rank #1 = best quality) Human Development Index (combines education, health and income higher score = better) 1 Ports 12.9 Telephones Electricity..7. Railroads Roads.. Air transport Singapore Hong Kong, SAR Korea Malaysia Thailand China Philippines Indonesia Viet Nam Lao PDR India Cambodia Nepal Bangladesh Source: World Economic Forum Global Competitiveness Report 29-1 Source: UNDP Outperforming neighbors over the long term also involves a broader strategy to be more competitive Business sophistication Market size Tech. readiness Global Competitiveness (higher score = more competitive) Innovation Financial market sophistication Institutions Labor market efficiency Infrastructure Goods market efficiency Macroeconomic stability Health & primary education Higher education & training Business Climate (rank among 1 countries, Rank #1 = best climate) Less Difficult Vietnam Cambodia Thailand Singapore Hong Kong, SAR Thailand Korea, Rep. Malaysia Taiwan, PoC China Vietnam Bangladesh Indonesia Nepal India Philippines Cambodia Lao PDR Source: World Economic Forum Global Competitiveness Report 29-1 Source: World Bank Ease of of Doing Business Report 21 13

14 The IMF is helping in numerous areas: Macroeconomic and financial sector policy advice through IMF surveillance Technical assistance: Monetary policy instruments and framework Strengthening banking supervision Public financial management reform Specialized training courses in macroeconomic policy formulation to build human capacity Thank you for your attention! John Nelmes IMF Resident Representative in Cambodia The views expressed in this presentation are those of the author, and not necessarily those of the IMF, its Executive Board or Management. 1