The World Bank Thursday upgraded its economic forecast for Cambodia in 2005 to 6.1 percent from 2.6 percent, saying "Cambodia's economic prospects for 2005 have improved considerably."

The garment exports being higher than originally expected have contributed to the improvement of economic prospects, according to the World Bank's latest edition of the twice-yearly economic survey of East Asia and the Pacific. The garment industry is the single largest foreign exchange earner for Cambodia.

The report said, "Though increased competition after expiry of the Multifiber Arrangement (MFA) is putting downward pressure on garment export prices and higher oil prices are dampening other sectors of the economy, Cambodia's projected growth for 2005 will be around 6.1 percent. Growth is expected to continue to be at about 6 percent in 2006."

Total garment exports during the first half of 2005 reached 820 million US dollars, rising 1.4 percent in nominal terms over the same period in 2004.

Meanwhile, Cambodia's non-garment industrial sectors such as tourism, telecommunications and construction have continued to expand.

According to the figures of Tourism Ministry, tourist arrivals in Cambodia jumped 38.4 percent to more than 680,000 in the first half of 2005 compared to the same period last year.

The construction sector contributed 10.4 percent to economic growth in 2004. And growth in the construction sector is projected to remain strong in 2005 at about 11 percent, according to the World Bank.

The World Bank's Senior Country Economist for Cambodia Rob Taliercio also contributed the success to "the prudent monetary and fiscal policies that the government has adopted, and acceleration in the pace of structural reform."

This growth has translated into poverty reduction and improved welfare. Based on an assessment of the new Cambodia Socio-Economic Survey, it is estimated that the poverty rate had come down from around 47 percent in 1993/94 to 35 percent at present.

"These gains have been largely due to the peace dividend and due to the strategy of global (joining World Trade Organization) and regional integration (joining ASEAN) that Cambodia has pursued aggressively," said Nisha Agrawal, the bank's manager for Cambodia.

The World Bank predicted in April that Cambodia's overall 2005 GDP growth was not likely to surpass 2.6 percent due to the intense competition in the new post-MFA garment industry.

The bank's report, however, called the government "to carefully monitor the widening gap between rural and urban areas," which the bank said has increased over the last decade.

Rob Taliercio said, "To sustain these gains in the coming decade, Cambodia can no longer rely on the old strategies but will instead need to rely much more on implementing a reform program to tackle the governance challenges that it now faces."

Source: Xinhua