Cambodia’s service sector is driving economic growth in 2023, despite a slowdown in the industrial sector, ADB reports

PHNOM PENH: In its last updated economic report, the ADB lowered its 2023 economic growth forecast for Cambodia to 5.3 percent from an earlier prediction of 5.5 percent, mainly due to slower-than-expected industry growth.

However, the ADB raised its service growth projection for 2023 from 7.3 percent to 8 percent, citing robust tourism recovery as the main driver.

There are four subsectors of Cambodia's service sector such as hotel and restaurant, , wholesale and retail, and transportation and communication.

Exports of garments, footwear, and travel items declined by 18.6 percent year-on-year in the first half of 2023, the report said, adding that this was partly offset by a 22.9 percent increase in exports of manufactures other than garments.

“Better growth prospects in major advanced economies should boost Cambodian exports for the remainder of 2023 even as domestic industrial growth slowed earlier in the year,” ADB country director for Cambodia Jyotsana Varma said in a press statement.

The report maintained the inflation forecast for this year at 3 percent and next year at 4 percent, saying that improved merchandise and tourism recovery should continue to reduce the current account deficit.

Risks to the outlook include sluggish growth in advanced economies, lower tourist arrivals and foreign direct investment inflows, prolonged tightening of global financial conditions, rising energy prices, concerns over high private debt and domestic financial stability, and extreme weather exacerbated by climate change, the report said.

According to the report, the ADB maintained the country's 2024 growth forecast at 6 percent.

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