As an IMF representative, one of the highlights of my travels is engaging with university students. It is especially meaningful to have this opportunity in Cambodia, where 65 percent of the population is aged 30 or younger. Your generation represents the bright future of a country that has made remarkable progress in less than four decades.
From the ruins of tyranny and genocide, Cambodia has experienced profound economic and social progress. Over the past 20 years, Cambodia has been one of the 10 fastest-growing economies globally. Poverty has significantly reduced—from 50 percent in 2005 to just 13.5 percent in 2014. The World Bank now classifies Cambodia as a lower-middle-income economy, marking a significant leap from its previous low-income status.
Cambodia’s impressive economic performance stems from hard-won macroeconomic stability. This stability is evident in relatively low inflation, growing international reserves, modest fiscal deficits, low public debt, and prudent economic policies. With strong economic fundamentals, Cambodia has every reason to be proud of its performance.
In 2017, we expect Cambodia’s GDP to grow by about 7 percent, fueled by strong garment exports and activity in the real estate and construction sectors. However, challenges remain. Cambodia must continue to ensure sustained growth and economic stability, particularly by creating good jobs for the country’s young population.
Let’s look at the global economic context, particularly in Asia, where Cambodia stands to benefit. The global economy is showing signs of improvement after nearly a decade of disappointing growth. Our global growth projection for 2017 is 3.5 percent, rising to 3.6 percent in 2018. Much of this improvement is driven by stronger growth in the U.S. and Europe, and Asia is expected to lead the way with a growth forecast of 5.5 percent in 2017.
Cambodia, with its open economy and young population, will benefit from these positive global and regional developments. However, challenges remain, particularly as Cambodia’s growth has been heavily reliant on a few industries, particularly low-value-added garments. To maintain robust medium-term growth, Cambodia must diversify its economy.
Several challenges could hinder Cambodia’s future growth:
- Infrastructure Deficits: Despite increased public investment, Cambodia still faces high energy costs, insufficient electricity supply, and a weak transportation network.
- Business Environment: Cambodia ranks low in terms of ease of doing business and competitiveness. High costs and bureaucratic procedures further inhibit growth.
- Governance and Regulation: Effective governance and regulatory reforms will be critical for Cambodia to compete with other rapidly developing nations in the region.
Despite progress in recent years, Cambodia’s financial system remains underdeveloped. Vulnerabilities have emerged, such as the rapid growth in credit and the over-exposure of the banking industry to the real estate sector. Additionally, the dollarization of the economy limits policy options. While these issues may seem less critical during a period of strong growth, they could become more pressing if the economic environment changes.
As Cambodia continues its journey toward development, it is crucial to equip the younger generation with the skills needed to thrive in a global economy. Education and healthcare standards must continue to improve, and schools must offer up-to-date training that equips students with the skills to secure good jobs. Moreover, financial inclusion is vital for improving living standards. Currently, only 13 percent of Cambodians have bank accounts, and many small businesses lack access to financial services. Expanding financial inclusion will provide new economic opportunities and help reduce poverty.
The National Bank of Cambodia has made strides in promoting financial literacy, which is critical for enhancing financial inclusion and ultimately fostering economic development.
One of the key areas where innovation can drive progress is through financial technology (Fintech). In many developing countries, Fintech has primarily meant mobile banking, and Cambodia has already seen success in this area with mobile accounts for remittances and payments. Expanding the availability of mobile financial services, such as online lending and accounting, could further unlock economic potential. With a young, tech-savvy population and widespread mobile phone usage, Cambodia has the market potential to become a hub for Fintech innovation in Asia.
Your generation will likely encounter job opportunities that don’t even exist yet, and embracing technological change will be essential. Innovation doesn’t only occur in Silicon Valley or Bangalore—Cambodia has the potential to be a driver of progress in the global economy.
The challenges facing Cambodia are not unique. Many countries around the world are navigating similar obstacles. What is needed to overcome them are reforms that encourage diversification, strengthen governance, and create opportunities for job growth. Financial inclusion, expanding infrastructure, and enhancing labor force skills are all opportunities for Cambodia’s future.
Your generation holds the key to Cambodia’s continued success. You have the potential to become the innovators, reformers, and leaders who will drive Cambodia to the next stage of economic development.
while the road ahead may be challenging, I remain optimistic. Asia, and particularly Cambodia, has shown tremendous resilience and determination to rise in the global economic ranks. The key to future success will be the commitment and vision of young people like you.
I look forward to returning to Cambodia and witnessing the continued economic progress and the contributions you will make in the years ahead.