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Cambodia needs to step up its participation in the global value chains in order to sustain economic growth, which is projected to slowdown amid concerns over the possible withdrawal of the preferential trade treatment from the kingdom by the European Union, the World Bank said in its latest report.
Such measures are also crucial to provide cushion for future growth against impact caused by any sharp slowdown in the Chinese economy as a result of the ongoing trade dispute between China and the United States, according to “Cambodia Economic Update” report released by the World Bank Wednesday.
"A possible withdrawal of the Everything But Arms (EBA) initiative, as well as a sharp slowdown in the Chinese economy (a potential outcome of continued U.S.-China trade tensions), could substantially dampen Cambodia’s growth prospects," the report said.
It added that Cambodia’s economic growth is projected to drop to 6.8 percent in 2020 from 7 percent in 2019. Meanwhile, it said, exports of garment and footwear products in 2019 declined to 15.3 percent compared to 17.7 percent in 2018.
Risks continue to persist for Cambodia’s financial sector due to its increased exposure to the construction and real estate sector, where rising indebtedness and combined bank and microfinance credit now account for over 100 percent of GDP.
“To move to the next stage of global value chain participation, Cambodia will need a much more sophisticated policy mix,” Inguna Dobraja, World Bank Country Manager for Cambodia, said in a press release.
“This would include expanding and deepening trade agreements, lowering barriers to imported inputs, continue improving the education and skills of the labor force, and harnessing the digital economy to support the integration of firms into global value chains,” she added.