Outlook for 2011-12

• The ruling Cambodian People's Party (CPP), led by the prime minister, Hun Sen, will remain politically dominant in 2011-12. The CPP controls more than two-thirds of the seats in the National Assembly (the lower house).
• The apparatus of the state will continue to be used against the government's opponents, such as the opposition leader, Sam Rainsy, who remains in self-imposed exile after being sentenced in absentia to a total of 12 years in prison.
• Cambodia's economy is recovering, but growth will not return to the highs of around 10% that were recorded in the years preceding the 2008-09 global recession. Real GDP will expand by 5.1% in 2011 and by 6.3% in 2012.
• Monetary policy will have to be tightened as inflationary pressures re-emerge in 2011, but the National Bank of Cambodia (NBC, the central bank) will not rush into raising the banking sector's reserve requirement.
• Although the NBC will continue to intervene in the currency markets to support the riel, the currency will depreciate against the US dollar by an average of 0.5% a year in the forecast period.
• The current-account deficit will remain substantial as a proportion of GDP in 2011­12, but Cambodia will avoid financing difficulties owing to its healthy foreign-exchange reserves and a recovery in foreign direct investment.

Monthly review

• The stand-off on the Cambodian-Thai border escalated in February as the two sides exchanged heavy artillery fire, and as a result thousands of civilians were displaced and an uncertain number of soldiers were killed or injured.
• Hun Sen's attempts to "internationalise" the border dispute have met with some success. Cambodia may benefit from foreign mediation as the International Court of Justice has previously ruled in its favour.
• In early February, the IMF said in a report on its recent Article IV consultations with Cambodia that the country's macroeconomic stability "continues to critically depend on prudent fiscal policies".
• The economic impact of the crossborder clashes has so far been limited, but trade between Cambodia and Thailand has been affected, with Thai exports to Cambodia down by about Bt110m (US$3.6m) each day during the fighting.
• Several major firms from Canada took part in that country's first trade and investment mission to Cambodia on February 14th-15th.
• Mining in Cambodia remains the main draw for Canadian investors. In late December a small Canadian mining company, Shamika Resources, acquired a gold and ruby concession in Cambodia.