Country Report Cambodia February 2010

Highlights

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 (SRP) will aim to build support at the expense of the CPP but will not be able to dislodge the ruling party from power.
  • After contracting by an estimated 1.5% in 2009 owing to the adverse impact of the global recession on garment exports, tourism and foreign investment, Cambodia's real GDP is forecast to expand by 3.3% in 2010 and 5.1% in 2011.
  • Monetary policy will have to be tightened as inflationary pressures re-emerge in 2010, but the National Bank of Cambodia (the central bank) will not rush into raising the banking sector's reserve requirement.
  • Personal disposable income will recover from 2010 as prices for agricultural commodities rise and garment factories begin to hire again.
  • The current-account deficit will remain wide in 2010-11, but Cambodia will avoid financing difficulties owing to its stock of foreign-exchange reserves and an eventual recovery in foreign direct investment.

Monthly review

  • The authorities have issued an arrest warrant for the SRP leader, Sam Rainsy, for refusing to appear in court to answer charges relating to a protest on the Vietnamese border. Sam Rainsy is thought to be in France.
  • In January Thailand's foreign minister, Kasit Piromya, said that his country would not normalise diplomatic relations with Cambodia unless Hun Sen distanced himself from Thaksin Shinawatra, a former Thai prime minister.
  • The Senate (the upper house) has approved legislation setting out the rules relating to land seizures by the government. Critics say that the terms of the law are too vague and could lead to more evictions.
  • Approved foreign direct investment in Cambodia fell by 46.2% to US$5.9bn in 2009, according to the Council for the Development of Cambodia, the official body chaired by the prime minister that handles foreign investment.
  • Consumer prices rose by 5.3% year on year in December. However, in 2009 as a whole prices fell by 0.7% on an annual average basis-the first year of deflation since 2001.
  • A private-equity fund, Leopard Capital, has closed its first multi-sector investment fund focused on Cambodia, after raising US$34.1m in capital.
© 2010 The Economist lntelligence Unit Ltd. All rights reserved
Whilst every effort has been taken to verify the accuracy of this information, The Economist lntelligence Unit Ltd. cannot accept any responsibility or liability for reliance by any person on this information
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