In its latest global economic outlook report released in January 2023, the World Bank lowered its 2023 growth forecast for the United States to 0.5% and the European Union to 0%. Cambodia’s garment industry exports will be affected by the slow growth of these two important markets. Jayant Menon, a senior researcher at the ISEAS-YusofIshak Institute in Singapore, said that the main export markets for Cambodia’s garment industry are the United States and the European Union. The economic slowdown in Europe and the United States may be detrimental to the export prospects of Cambodia’s garment industry this year.
The “Overall Economic Situation from 2022 to 2023” report compiled by the General Directorate of Policy of the Ministry of Finance and Economics of Cambodia shows that according to Cambodian government statistics, the Cambodian garment industry will be affected by the new coronavirus in 2020 Exports once declined by 6.1%, and then rebounded with a growth rate of 10.8% in 2021 and 14.5% in 2022. Due to declining demand in foreign markets, especially the EU market, the growth of the apparel export sector this year is expected to slow down to only 5.5%.
When analyzing the overall economic performance and prospects of the world and Cambodia, the Ministry of Finance said that according to the World Economic Outlook report released by the International Monetary Fund (IMF) in October 2022, The global economy is expected to grow by 3.2% in 2022 and 2.7% in 2023. Among them, the economic growth of the world’s three largest economies, including the United States, the European Union, and China, will slow down significantly in 2022 and 2023.
Cambodia’s Ministry of Finance pointed out that the economic slowdown reflects downside risks. The US central bank raises interest rates to combat inflation. China’s economy has also slowed down sharply due to the impact of the coronavirus clearance policy and the worsening real estate market crisis. In addition, the spillover effects of the Russia-Ukraine war and Russia’s tightening of natural gas supply to Europe may cause many uncertainties. Despite the unfavorable situation in major export markets, strong demand for Cambodian products will still drive Cambodia’s economic growth by 5.2% in 2022.
Vongsey Vissoth, Undersecretary of the Ministry of Finance and Economy, said that herd immunity has enabled Cambodia to resume its socio-economic activities early and successfully reopen by the end of 2021. Coupled with the favorable external environment, Cambodia’s garment and non-garment manufacturing exports will maintain strong growth in 2022. However, in 2023, the economic weakness in Cambodia’s main export markets may affect Cambodia’s garment exports. As for the demand in other manufacturing markets, it remains to be seen.
