Country Report Cambodia March 2011

Outlook for 2011-12: Policy trends

As economic growth accelerates in 2011-12, the government will begin to withdraw the monetary and fiscal stimulus that it introduced in response to the 2008-09 global recession. However, fiscal policy will remain broadly expansionary. According to the 2011 budget, which was approved by the lower house in November 2010, government expenditure in US dollar terms is set to rise by around 20% from its 2010 level, to US$2.4bn. As inflationary pressures return, the National Bank of Cambodia (NBC, the central bank) will seek to restrain growth in the money supply, but the effectiveness of monetary policy will be hampered by the fact that the economy is highly dollarised. The 2008-09 global recession exposed Cambodia's structural economic vulnerabilities, notably a dependence on garment exports, and Hun Sen's government has responded by seeking to develop other sources of economic growth, particularly in the agricultural sector. As part of its plans to become a major rice exporter, the government has set a target of raising rice exports to 1m tonnes by 2015, from around 850,000 tonnes in 2009.

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