Cambodia's economy to grow 6.5 pct in 2011: ADB

(Xinhua News Agency) -- Cambodia's gross domestic product (GDP) is set to increase by 6.5 percent this year, up 0.2 percentage points from last year, thanks to agriculture, tourism and garment industries, said the Asian Development Bank's Outlook 2011 released on Wednesday.

The forecast is the same as the prediction by the World Bank and similar to the forecast of the government of Cambodia at between 6-7 percent this year.

"Agriculture is estimated to expand 4.3 percent this year, thanks to continuing investment in irrigation and broader access to fertilizers and high-yield seeds," said the report, "Growth in industry is projected at around 10.8 percent based on positive indications for future garment orders from the United States and Europe."

It forecast the growth of services at around 5 percent and higher tourism receipts will contribute to a surplus in services trade.

"The continued recovery of exports and tourism in 2011 is expected to help Cambodia sustain its return to a long-term growth path of 6-7 percent," said ADB senior country economist Peter Brimble at the launch of the report.

The bank forecast the inflation rate as 5.5 percent this year, up from 4 percent last year, due to external events such as unexpected global economic weakness or higher-than-assumed oil prices.

The report also warned that the lack of progress on fiscal consolidation, combined with low tax revenue and the absence of government debt securities, may eventually lead to problems in funding the fiscal deficit.

"This will require continued prudent handling of monetary policies and government expenditures, combined with intensified efforts to build capital markets and to broaden the tax base and increase the low levels of revenue collection," said Brimble.

Meanwhile, Brimble said that to date, Cambodia has the external debt of estimated 3.5 billion U.S. dollars. In 2010, China is the largest lender to Cambodia, accounting for 58 percent of the total loans Cambodia received.

The bank also forecast that the country's gross international reserves are projected to grow to 2.84 billion U.S. dollars this year.

Moreover, it stresses the potential benefits of enhanced connectivity with regional neighbors Thailand, Laos and Vietnam, and emphasizes the need to improve the competitiveness of the garment, agriculture, and tourism sectors by reducing the high cost of transport, energy and related infrastructure, raising the quality of existing products and services, and developing skills to add value to products.