Country Report Cambodia October 2009

Outlook for 2010-11

• The Cambodian People's Party (CPP), led by the prime minister, Hun Sen, will remain politically dominant in 2010-11. The CPP controls around two-thirds of the seats in the National Assembly (the lower house of parliament).
• During what is proving to be a difficult period economically, the main opposition Sam Rainsy Party will aim to build support at the expense of the CPP, but it will not be able to dislodge the CPP from power.
• The government will pursue an expansionary fiscal policy in order to support domestic demand. The effectiveness of monetary policy will remain limited, owing to the fact that the economy is highly dollarised.
• Owing to the weak global economic environment and its adverse impact on garment exports, tourism and foreign investment, real GDP will contract by 1.5% in 2009. GDP will then expand by 3.3% in 2010 and 5.1% in 2011.
• Personal disposable income will recover only slowly from 2010 after falling in 2009, when rural and urban wealth was driven down by lower prices for agricultural commodities and real estate.
• The current-account deficit will remain wide in 2010-11, but Cambodia will avoid financing difficulties owing to its stock of foreign reserves and an eventual recovery in foreign direct investment (FDI).

Monthly review

• Hun Sen has said that prosecuting more former leaders of the Khmer Rouge for crimes against humanity could led to violence, in what could be interpreted as a threat against the UN-backed tribunal conducting the cases.
• An opposition member of parliament, Mu Sochua, who in early August was convicted of defaming Hun Sen, faces imprisonment after refusing to pay CR16.5m (around US$4,000) in fines and damages.
• On September 5th the government ended a World Bank-funded programme to issue Cambodians with official titles to their land. The decision to end the programme comes amid a growing problem of land seizures by developers.
• The National Bank of Cambodia (the central bank) has said that it will continue to purchase riel in an attempt to support the currency, which has depreciated by about 2% against the US dollar so far this year.
• Approved FDI fell by 82% year on year to US$$1.5bn in January-July, according to the Council for the Development of Cambodia.
• In July Cambodia's merchandise exports fell by 26.4% year on year to US$249.9m, according to the Ministry of Commerce. But there was evidence that the decline in merchandise trade may have bottomed out.

This report covers the following industry codes:
SIC Code: 70
NAICS Code: 72