Country Report Cambodia February 2010

Outlook for 2010-11: External sector

Owing to poor overseas sales of garments, which account for over 70% of Cambodian export revenue, merchandise exports are estimated to have fallen sharply in 2009. The weakness of the economy in the US, Cambodia's leading market, will continue to depress garment exports. Even after growth in the US recovers, Cambodia's garment manufacturers will struggle to compete with more efficient producers, particularly those in Vietnam, and export revenue will therefore not expand rapidly in 2010-11. The merchandise trade deficit will be larger than in 2009, as the import bill will remain substantial owing to Cambodia's reliance on imported capital goods. The services surplus will grow in 2010-11 as tourism recovers following a drop in the number of high-spending visitors to the country in 2009, but there will be an increase in demand for imported trade-related services, such as insurance and freight. The income deficit will widen further, owing to increased repatriation of profits and dividends by foreign-invested firms. The current-account deficit will narrow to 7.7% of GDP in 2010 and 6.4% in 2011, from an estimated 9.1% in 2009.

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