Maintaining a strong trade cooperation

u Chi

Like numerous economies around the world, the Cambodian economy has been strongly impacted by the Covid-19 pandemic. While the effect is likely to take years to fully recover from, according to BIDV Training and Research Institute, there are still positive figures for Cambodia’s economy.

Macro -economy amid Covid -19

The assessment from BIDV Training and Research Institute is based on statistics from the National Bank of Cambodia (NBC) as of 14 July on the latest information and developments related to the Cambodian macroeconomy, financial and banking market in the first six months of 2020.

In the first half of the year Cambodia's economy was hit hard by the Covid-19. The pandemic is considered the country’s largest unprecedented shock since 1994, affecting both supply and demand for the country. The Cambodian economy is highly dependent on international trade. Its heavy industry has yet to develop and its light industry holds a relatively weak position in the global value chain. Its areas of strength include processing sector for export (such as garments and footwear) and orders from FDI enterprises or from abroad. Meanwhile, domestic consumption still depends on supply from overseas.

The Cambodian economy is forecast to continue facing challenges in the second half. The NBC and other international organisations (such as the WB, ADB and CEIC) predict that it will be hard for the country's economy to achieve high growth in 2020. GDP growth is forecast to be only 2.3 percent in 2020 (down sharply from 7.1 percent in 2019), before recovering and reaching 5.7 percent in 2021. This is mainly due to the decline of some of Cambodia’s important industries and sectors such as exports, services (especially tourism) and production.

In particular, service sector growth in 2020 could well decrease by 1.7 percent compared to 2019 (especially tourism and real estate). Industrial sector growth is expected to reach 6.5 percent in 2020 (lower than the growth rate of 10 percent seen in 2019), mainly due to difficulties in exporting and narrowing garment and footwear production, construction and real estate industries.

However, the Cambodian Government

and a number of international organisations agree that following the serious impact of the Covid-19 pandemic, the Cambodian economy will recover quickly in 2021. In June, the World Bank forecast that Cambodia's economy would recover and grow by 6 percent in 2021. ADB expects Cambodia to recover quickly - by 5.9 percent in 2021.

Trade to rise cooperation continues

A number of Vietnam’s outstanding projects have been successfully implemented in Cambodia, contributing to the latter’s socioeconomic development. These include projects belonging to Vietnam Rubber Industry Group, Viettel Group (Metfone Telecommunications Company), BIDV and BIDC (Bank for Investment and Development of Cambodia). The Cambodia-based companies have reported profits, paid taxes and make significant contributions to Cambodia's social security. In the first

six months of the year, four companies invested by Hoang Anh Gia Lai Group have contributed significantly to the positive results of Cambodian agricultural exports.

It can be said that Vietnam’s investment projects in Cambodia are long-term and effective and are contributing to the Cambodian government’s budget revenue, social security, infrastructure and economic development.

Currently, Vietnam is Cambodia's fourth largest trading partner (ranking after the US, China and Thailand). As of 14 July, Vietnam accounted for about 15 percent of Cambodia's total import-export turnover, according to statistics from the NBC. Meanwhile, Cambodia is Vietnam’s 19th largest trading partner.

A noteworthy point in the trade relationship between the two countries: Vietnam has always been a trade surplus to Cambodia with a high

Phnom Penh, Cambodia

proportion of exports to total trade turnover (about 80 percent), meeting the demands of Cambodian consumers and economic development. The main export items from Vietnam to Cambodia include petroleum, textiles, iron and steel, textile materials, apparel, leather and shoes. In 2019, Vietnam's trade surplus to Cambodia reached USD3.46 billion - the highest to date.

In the first six months of 2020, affected by the Covid-19 pandemic, the import-export turnover between Vietnam and Cambodia reached USD2.55 billion, down 7.93 percent over the same period last year. In particular, Vietnam's export turnover to Cambodia reached USD2.02 billion, down 6.78 percent year-on-year, and imports from Cambodia reached nearly USD528 million, down 12.08 percent year-on-year, mainly due to the decline in exports of agricultural products from Cambodia to Vietnam. It is forecast that Vietnam will continue to be among Cambodia’s top five largest trading partners.