Increasing Productivity is Key for the Future Phnom Penh, May 17, 2017 — Driven mainly by resilient construction and garment sectors, Cambodia’s economic growth remains strong, projected to reach 6.9 percent in 2017 and 2018, according to a new World Bank report. While the outlook remains favorable, there are some signs of moderation, in particular in the construction sector, said the latest Cambodia Economic Update (CEU) launched today. Garment exports are facing strong completion. Due to US dollar appreciation, rising labor costs, and competition from other regional low-wage countries, growth in garment exports decelerated, expanding at 8.4 percent year-on-year in 2016, compared with 12.3 percent in 2015. To boost export competitiveness, the report emphasizes the importance of Staying Competitive Through Improving Productivity. However, the moderation is expected to be offset by a recovery in the tourism sector due in part to newly established regional direct flights and a numbers of initiatives to boost arrivals, and a gradual expansion of the agriculture sector. “It is encouraging to see that Cambodia’s economic growth will continue to be strong in the next few years, and that poverty rates will continue to decline,” said Inguna Dobraja, World Bank Country Manager for Cambodia. “Going forward, it is important to ensure that the country invests in pro-growth public infrastructure underpinning its high growth trajectory, while also focusing on building skills for future growth areas and strengthening public sector delivery.” The report highlighted key areas that will help safeguard Cambodia’s strong growth: Boosting labor productivity to compensate for rising real wages. A top priority will be to improve the quality of basic education and to promote vocational and technical skills, while reducing energy costs to attract and compete in high value-added and more sophisticated manufacturing;Improvements in public service delivery, given that the public sector is a major service provider and a key facilitator for private sector development; Enhanced efforts to improve public investment management legal framework and implementation capacity in order to scale up government-financed capital spending to compensate for a gradual reduction in development partner-funded public capital investment. The Cambodia Economic Update is a biannual report that provides up-to-date information on macroeconomic developments in Cambodia, both in the short and medium term. The longer-term development challenge analyzed at length in this issue is investment in public infrastructure and services.