COVID-19

Economic Impact of COVID-19 on Cambodia and its Policy Response

Ambarish Kumar Verma Jun 4, 2020
Economic Impact of COVID-19 on Cambodia and its Policy Response

Cambodia’s economy is expected to be adversely affected by COVID-19 pandemic in 2020. The real gross domestic product (GDP) of Cambodia is expected to shrink, unemployment level to increase and current account balance to show negative growth due to global economic slowdown caused by COVID-19 this year. Rising unemployment will be driven by global economic slowdown which has impacted the garment and footwear sector which is employs large population in Cambodia. As of 04th June 2020, Cambodia had 125 confirmed COVID-19 cases out of which 123 people have recovered from the disease while none have lost their lives.

In this blog post we will be focusing on economic impact of COVID-19 pandemic on Cambodia. We will also be taking a look at the fiscal and monetary related policy measures taken by Cambodia government under following sections –

  1. Impact of COVID-19 on Cambodia Economy in 2020

  2. Coronavirus (COVID-19) Containment Measures of Cambodia

  3. Coronavirus (COVID-19) Related Fiscal Policy Measures by Cambodia

  4. Coronavirus (COVID-19) Related Monetary Policy Measures by Cambodia

We have covered various macroeconomic factors and PESTLE (political, economic, social, technological, legal, and environmental), SWOT (Strengths, Weaknesses, Opportunities and Threats) and risk analysis for Cambodia in separate market research reports.

Economic Impact of COVID-19 Pandemic on Cambodia

1. Impact of COVID-19 on Cambodia Economy in 2020

Cambodia’s real gross domestic product (GDP) was KHR 56606.878 billion in 2019 and due to COVID-19 outbreak it is estimated to shrink by 1.587% to be around KHR 55708.526 billion in 2020.

Cambodia’s unemployment rate was 0.677% of total labor force in 2019. Unemployment rate is however expected to increase with more than 200,000 workers facing unemployment because of the global economic slowdown due to the COVID-19 pandemic which has impacted the garment and footwear sector in Cambodia. The unemployment is expected to increase by 4.92% and reach 0.712% in 2020.

Cambodia’s current account balance which has been constantly decreasing since 2018. It is expected to decrease it’s current account balance at -22.179% of GDP in 2020 from -12.533% of GDP in 2019. This means Cambodia will remain net borrower from rest of the world in 2020.

As of 27th May 2020, the Cambodia government has taken following fiscal and monetary measures to contain coronavirus (COVID-19) pandemic.

2. Coronavirus (COVID-19) Containment Measures of Cambodia

  • Khmer New Year will be suspended/postponed: the public sector, institutions and private sector will work as usual, the Royal Government will compensate workers with 5 days of public holidays when it is an appropriate time. The Ministry of Labor and Vocational Training has issued Notification No. 012/20 on Postponement of Khmer New Year Holiday 2020.
  • The Royal Government has not yet issued any laws or regulations to restrict the travel or put curfew in place, instead the Royal Government requests that people reduce unnecessary travel.
  • The possibility of declaring a State of Emergency has reduced, though this will continue to depend on the situation. The Law on a State of Emergency states that it shall not exceed 3 months if implemented and can be extended for the same period. The Law is expected to be passed after 13-16 April.
  • There will be no closure of pagodas, temples or religious places, factories, restaurants, coffee or other shops.
  • Exports of fish, rice and paddy rice are suspended to ensure the domestic supply. This period is an opportunity for the agriculture sector to grow while the industry and tourism sector are affected. The industrial sectors that produce medical and food are not impacted.

3. Coronavirus (COVID-19) Related Fiscal Policy Measures by Cambodia

  • Ministry of Economy and Finance Decision No. 028 on Establishment of a Multidisciplinary Working Group to Plan Monetary and Banking Measures to Manage the Impact of Covid-19 and the Withdrawal of “Everything but Arms (EBA)” - On 03 April, the Ministry of Economy and Finance issued decision No. 028 to establish a working group to study and plan monetary and banking measures, named the “Multidisciplinary Working Group”, which will be co-chaired by representatives from the Ministry of Economy and Finance and the National Bank of Cambodia. The aim of this working group is to support the Committee on Economic and Financial Policy to design and implement measures to manage the impact of Covid-19 and EBA withdrawal. This working group may invite officials from ministries, institutions, organizations, development partners, private sector representatives, and other relevant counterparts to participate in their meeting if necessary.
  • Ministry of Economy and Finance Decision No. 024 on Establishment of a Task Force to Control Supply and Prices of Strategic Goods During the Fight Against Covid-19 - On 03 April, the Ministry of Economy and Finance issued decision No. 024 on the establishment of a task force to control supply and prices of strategic goods during the fight against Covid-19. This will determine the types of strategic goods that are deemed essential for daily consumption during the Covid-19 situation for instance: rice, salt, vegetable, fish, meat, mask, cleaning alcohol, pharmaceutical and medical equipment. This task force will monitor the daily demand and supply of such strategic goods and guarantee sustainability without any interruptions. This task force will also check quality and ensure appropriate pricing and avoid dramatic price increases.
  • Ministry of Economy and Finance Decision No. 027 on Establishment of a Task Force to Plan for Budget Policy on Financing and Social Assistance in Controlling the Fight Against Covid-19 - On 03 April, the Ministry of Economy and Finance issued a decision No. 027 to establish a task force responsible for planning the budget policy on financing and social assistance. The task force will study and determine the required budget to fight against Covid-19 based on three priorities: preventing Covid-19 outbreak, stabilise livelihoods of poor and vulnerable people, and recover and stabilise businesses. This task force will also seek to mobilise the financing from abroad as much as possible such as budget support, and technical support from development partners through bilateral and multilateral framework agreements.
  • Ministry of Health Instruction on Preventive Measures of COVID-19 Transmission for Vehicle Transportation Owners and Passengers of Common Transport Vehicles - On 5 April, the Ministry of Health issued an instruction to passengers and vehicle owners (Buses and Mini Buses) that carry more than 10 passengers. The owners are instructed to regularly clean their vehicles and provide alcohol gel to passengers who are encouraged to wear masks. The drivers must temporarily stop driving if they have symptoms of a cold
  • Ministry of Tourism Letter No. 168 on Temporary Suspending all Massage, Spa and Wellness Businesses - On 07 April, following an inter-ministerial committee meeting, the Ministry of Tourism issued letter No. 168 to city and provincial governors to temporarily suspend all massage, spa and wellness businesses from 07 April 2020 until further notice.
  • Ministry of Foreign Affairs and International Cooperation Instruction to Automatically Extend Tourist Visas for Arrivals after 1 January 2020 - On 3 April, the Ministry of Foreign Affairs and International Cooperation issued a letter to inform all diplomatic and consular missions that due to Covid-19, the Kingdom of Cambodia will grant automatic tourist visa extensions for some foreign tourists that arrived in Cambodia after 1 January 2020 and will exempt visa overstay fines until they are able to depart.
  • Ministry of Interior Instruction on Measures to Ensure Stability, Security, Public Order and Social Safety during Khmer New Year 2020 - On 3 April, the Ministry of Interior’s General Commissariat of National Police instructed all technical departments/institutions under its supervision and all municipal and provincial police stations to plan and implement measures to maintain stability and security during the coming Khmer New Year period (13 – 16 April).
  • Ministry of Health Instruction on Preventive Measures Against Covid-19 at Barbers, Beauty Shops and Other Related Services - On 05 April, the Ministry of Health instructed the public to minimise their use of certain services such as hairdressers, nail and beauty salons and other similar services. If it is not possible to avoid this, the public is instructed to protect themselves by following the Ministry’s measures of wearing masks, washing hands, maintaining physical distance, avoiding close communication and other practices.
  • Ministry of Commerce Notification to Fuel Stations or Depots that Sell Fuel for Unreasonably High Prices - On 2 April, the Ministry of Commerce issued a notification to warn all fuel station and depot owners who sell fuel for unreasonably high prices or misrepresent the quality or quantity of fuel, that the Ministry will take action by enforcing transitional fines, suspending business operations or submitting a complaint to the court.
  • Ministry of Education, Youth and Sport Letter No. 1890 on Temporary Suspending all Sports Activities and Exercises which Require Gathering in Public and at Private Sport Clubs - On 07 April, the Ministry of Education, Youth and Sport issued Letter No. 1890 to temporarily suspend all sports activities and exercises which require gathering in public and private sport clubs from 07 April 2020 until further notice.

4. Coronavirus (COVID-19) Related Monetary Policy Measures by Cambodia

  • For factories that have been impacted, the Royal Government will pay $40 and factories will pay $30 to employees whose jobs have been suspended, without requiring employees to attend training.
  • The Prime Minister reiterated his request to the private sector to reduce rental fees or defer repayments without seizing property or implementing fines.
  • The General Department of Customs and Excise issued guidance —Letter No. 1065/20—temporarily lifts restrictions, requiring permission be obtained from the Ministry of Health for the export of all types of masks. Letter No. 1065/20 is effective 4 May 2020.

Source – With inputs from Organisation for Economic Co-operation and Development (OECD), International Monetary Fund, World Bank, International Labour Organization (ILO) and Government of Cambodia.

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