PHNOM PENH The World Bank on Monday projected its growth forecast for Cambodia to 5.5 percent in 2023, thanks mainly to the revival of the services sector and improvements in agricultural production.

According to the World Bank's East Asia and Pacific Economic Update, given the relatively fast pace of growth, the pace of poverty reduction is expected to accelerate. Downside risks include weaker-than-expected global demand, a protracted period of tighter global financial conditions, and/or a renewed oil and food price shock.

The tourism and hospitality industries are likely to accelerate further, with a projected increase in international arrivals, while exports and foreign direct investment inflows are expected to be strengthened by the newly ratified free trade agreements, a substantial increase in private and public investment in key physical infrastructure, and structural and sectoral reforms.

The Regional Comprehensive Economic Partnership agreement and other free trade have given a boost to the Kingdom's economic growth, said Aaditya Mattoo, chief economist of the World Bank's East Asia Pacific Region.

“Certainly the RCEP agreement by creating greater predictability of market access and by inducing some reforms in Cambodia's own policies can be expected to help both to generate new trade and new investment flows and hopefully to help Cambodia in its goal of diversifying its economy and its exports which have been heavily reliant on garment so far,” he said during a video press conference on the launch of the World Bank's East Asia and Pacific Economic Update, on Monday.

In 2024, the economy is expected to improve further, growing at 6.1 percent as goods exports are projected to also improve and gradually diversify, while FDI inflows will likely be boosted by the new Law on Investment, said the report.

Over the medium term, the economy is expected to trend back to potential, growing at 7 percent, read the report.