US tariffs hit Cambodia's growth outlook; AMRO calls for reforms
The AMRO mission, led by principal economist Dr Jinho Choi, with policy discussions involving AMRO director Kouqing Li and chief economist Hoe Ee Khor, assessed Cambodia's macroeconomic outlook, vulnerabilities, and policy recommendations, AMRO said in a release.
'Due to the sharp rise in tariffs on its goods export to the US, Cambodia's economic growth is expected to decelerate to 4.9 per cent in 2025 and 4.7 per cent in 2026. However, the economy is resilient and the government should take targeted measures to support the economy, especially the affected sectors,' said Dr Choi.
Inflation in 2024 was highly volatile. Although the consumer price index averaged just 0.8 per cent in 2024, inflation spiked in early 2025 and is forecast at 2.7 per cent for the year before moderating to 2.2 per cent in 2026, returning to pre-pandemic levels.
The current account surplus narrowed to 0.5 per cent of GDP in 2024, shifting into a deficit of 3.6 per cent in 2025, widening further to 5.5 per cent in 2026. Foreign direct investment inflows are projected to decline in 2025 amid investor caution before recovering in 2026.
AMRO highlighted that as a small, open economy; Cambodia remains highly vulnerable to external shocks, compounded by domestic financial sector vulnerabilities and long-term structural challenges.
The most pressing concern is the uncertainty over the duration and magnitude of new US tariffs, currently under a 90-day review. Prolonged trade protectionism could significantly depress global growth, impacting Cambodia through investment and trade channels.
In the longer term, Cambodia's graduation from least developed country status in 2029 poses additional challenges to export competitiveness and borrowing costs.
AMRO urged Cambodia to adopt a multifaceted policy approach to strengthen resilience. In the short term, targeted fiscal support and flexible monetary policies should sustain economic activity, while regional cooperation must be enhanced to boost bargaining power and foster intra-regional trade.
Medium-term priorities include export diversification and improving domestic competitiveness. Swift implementation of the revenue mobilisation strategy is critical to addressing the budget shortfalls seen in 2023 and 2024.
The National Bank of Cambodia should maintain an accommodative monetary stance to support liquidity and economic growth but ensure that regulatory forbearance measures addressing NPLs are time-bound to prevent moral hazard. Strengthening financial stability frameworks—including the establishment of a deposit insurance scheme, banking resolution mechanisms, and crisis management frameworks—is urgently required.
AMRO commended the Cambodian government's commitment to fostering high-quality, sustainable, and inclusive growth but stressed that achieving this vision requires concrete, well-implemented policies to support underperforming sectors, enhance competitiveness, and accelerate economic diversification.
Cambodia's growth is set to slow to 4.9 per cent in 2025 and 4.7 per cent in 2026 due to US tariffs, AMRO said. Inflation will rise to 2.7 per cent in 2025 before easing. AMRO urged targeted fiscal support, monetary easing, and export diversification. Financial stability frameworks and swift revenue reforms are also critical to boosting resilience.
Fibre2Fashion News Desk (HU)
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Print
4 hours ago
- The Print
Modi govt has learned from past FTAs. Its priority now is building a manufacturing powerhouse
India and the US are currently holding talks over a trade agreement, with the sixth round expected to be held in August, when American trade officials will visit India. This shows India's importance as a trading partner for the US. Trump had announced a 90-day window for tariff negotiations, which ended on 9 July. He later extended the deadline to 1 August and sent letters to 14 countries informing them about new tariff rates. With the emergence of new geopolitical realities arising out of the unilateral announcement of reciprocal tariffs by President Donald Trump, the US cannot be considered a very reliable trade partner. And, even if a bilateral trade agreement with the US is concluded, uncertainty about the country's future actions remains. There are other ambiguities around Trump's administrative actions, and no one is sure of the outcome of US courts' and the Senate's interventions. Therefore, prudence demands that we go slow and wait for countries such as China, Japan, and Vietnam to negotiate with the US. India, meanwhile, can build strategic partnerships with other countries and blocs to prevent overdependence on the US market. The EU is expected to be stable and predictable in its approach, but India has to deftly negotiate the bloc's impulse to impose non-tariff barriers under the garb of human and labour rights, environment, climate change etc. The World Trade Organization is virtually defunct and rule–based trading order looks like a thing of the past. Every country, including India, is negotiating Free Trade Agreements (FTAs) with multiple other nations to protect its export market. In May, India concluded FTA negotiations with the United Kingdom, while talks with the EU and the US are in advanced stages. However, our approach to FTAs cannot be a simple replication of the old template and must be influenced by outcomes of the not-so-successful past trade agreements, such as the ASEAN-India FTA and the Regional Comprehensive Economic Partnership (RCEP) negotiations. Past mistakes The global trade and financial architecture that emerged in the post-World War 2 period supported a rule-based trading system. It allowed several poor countries to overcome the limitations of a small economy and tap into the export market. As a result, these countries — like South Korea, Taiwan, and China — were able to experience above–average growth rates for a long period of time. We missed riding the bus of free trade due to earlier policy misadventures like quota, license raj of Congress–led governments. Now our government is committed to make India a manufacturing powerhouse, but the bus of free trade has hit major road bumps. India is focusing on ensuring competitiveness of domestic industry right now, as there is absolutely no substitute for building the manufacturing sector. Past FTAs failed to yield much benefit because they exposed domestic industries to global competition without strengthening the manufacturing ecosystem through infrastructure development, availability of land and power, and ease of compliances. India needs structural reforms to reduce input costs. The Modi government's focus is on slashing costs of land, power, logistics, compliances, and raw material to enhance global competitiveness of our manufacturers. Several steps have been taken in the last 11 years by the Centre, but a lot remains to be done at the state–level, as most of these areas are basically dependent on state policies. Micro, small, and medium enterprises (MSME) is an important sector for employment generation and integrating our manufacturing into global and regional supply chains. Therefore, before entering into any agreement, the government is ensuring full support to MSMEs. The MSMEs also have a lot to do at their end, since they face difficulty meeting international standards, which limits their competitiveness. It is important for this sector to build institutional capacity and technical know-how to follow global trade standards. Quality Control Order (QCO) was brought with this intention, but it has emerged as another challenge for Indian industries. QCOs hinder the import of raw materials and intermediate products required for manufacturing, creating a negative impact on the domestic production of goods, and reducing India's export competitiveness. Therefore, there is a need for a more sector-specific approach to QCOs. Our recent experiences with custom duties have shown that there is a conflict between imposition of countervailing duties and the interests of MSMEs. Such duties tend to favour big domestic producer industries at the cost of MSMEs which are the users of products that are subject to countervailing duties. So FTAs provide an opportunity for strategic tariff reduction on intermediate goods for the betterment of Indian industries. India will take a data-driven approach in determining tariffs to ensure that they don't disrupt supply chains or discourage innovation and investment. Agriculture sector protection, intellectual property rights, and public procurement are critical and form an important part of tariff negotiation. Hence, their interest is non-negotiable. Any concession given in these areas will be carefully evaluated and bargain precisely measured. We know that if India gives concession to one country or region, others would demand similar treatment and privileges. India should not bend over backward to seek concessions for movement of its citizens across borders as service providers. The negotiating countries use this demand to get concessions from India. Indian talent is in huge demand globally and other countries would anyway need Indian expertise. Otherwise, India can harness its human resources and potential to its own advantage. Also read: India's infrastructure revolution is powering its rise in manufacturing An opportunity Major economic decisions are not made in the fog of uncertainty. Global economic uncertainties are not fully comprehensible and controllable, therefore India's focus is on reducing domestic policy uncertainties. It will surely boost private capital formation. India also has to attract massive foreign capital in export-oriented sectors. But this is easier said than done. The country's image as a destination for foreign capital faces challenges due to certain decisions of the past government, especially the Vodafone tax dispute. India still has significant work to do in areas like judicial reforms for contract enforcement. Trade considerations cannot be fully separated from strategic considerations. The China+1 and risk diversion strategy of global manufacturers are an opportunity for India to benefit from current geopolitical challenges, and therefore the country's focus in FTA negotiations is to counter China. Since China is a major challenge for India in multiple spheres, teaming up with countries at the receiving end of China's irredentist and mercantilist policies is a viable option. This also means that India should still work for multilateral trade deals because third-world countries get a level playing field as well as some preferential treatment under multilateral trade platforms such as WTO. Gopal Krishna Agarwal is the National Spokesperson of BJP. Views are personal. (Edited by Aamaan Alam Khan)
Mint
4 hours ago
- Mint
Tariff risk drives another round of Asia forecast downgrades
SINGAPORE—A fresh wave of growth forecasts for Asia highlights the threat posed by tariffs to the region, even as trade deals gather pace. The Asian Development Bank and multilateral organization Asean+3 Macroeconomic Research Office, or Amro, both lowered growth projections for major Asian economies, citing the impact of U.S. trade policy. Asia-Pacific has weathered a tough external environment this year, 'but the economic outlook has weakened amid intensifying risks and global uncertainty," said ADB chief economist Albert Park. Strong domestic demand and export front-loading supported regional economies in the first half of the year, but that momentum is expected to weaken, the Philippines-based multilateral bank said in a report Wednesday. The ADB now projects gross domestic product growth for developing Asia at 4.7%, down from April's forecast of 4.9% and the 5.1% expansion recorded in 2024. Next year, growth in developing Asia, which comprises 46 ADB members including China, South Korea and India, is forecast to slow further to 4.6%. Southeast Asia will be hit hardest by worsening trade conditions and persistent uncertainty, the ADB warned. Although several Southeast Asian nations have negotiated for lower tariffs, analysts say that won't offset the blow of high trade barriers, economic fragmentation and policy shocks. Growth in Vietnam, the first to get a deal, is still expected to slow through 2025 and 2026 as U.S. tariffs dampen export demand. The ADB cut Vietnam's GDP growth projections to 6.3% in 2025 and 6.0% in 2026, from 6.6% and 6.5%, respectively. Those who have yet to reach a compromise, such as South Korea or Taiwan, face significant 'reciprocal" tariffs on U.S.-bound exports if no agreement is reached by Aug. 1. The temporary trade truce between the U.S. and China is also set to expire in August. 'A renewed imposition of the U.S. reciprocal tariffs or a re-escalation in US-PRC [People's Republic of China] trade tensions could reduce regional growth by 0.5 to 1.4 percentage points," the ADB said. A faster deterioration in China's property market also poses a risk to regional growth, it added. China's latest batch of property data showed the sector has yet to recover, with housing prices and investment still subdued as officials struggle to revive demand. Beijing's other stimulus efforts, including for consumption, helped the economy grow in the first half of the year, but the outlook for the rest of 2025 remains challenging, the ADB said. For now, it maintains its growth forecasts for China at 4.7% this year and 4.3% in 2026. Beijing has a target of 5% for this year. Tariff pressures also led ADB to trim growth views for India to 6.5% and 6.7% in 2025 and 2026, respectively. South Korea's forecast was lowered to 0.8% this year and 1.6% the next year. Amro echoed concerns about a continued lack of clarity on Trump trade policy. 'Tariffs will likely reduce U.S. demand, increase investment uncertainty and dampen consumer confidence," the multilateral organization said. The resulting global slowdown will further impact ASEAN+3, which includes the 10 Association of Southeast Asian Nations members, plus China, Japan, and South Korea. Amro expects regional growth to slow to 3.8% this year and 3.6% next year. Under a scenario where U.S. tariffs on China revert to April 2 levels, BRICS-aligned economies face an additional 10% duty, and previously exempt goods incur a 25% levy, growth could drop below 3% next year, Amro estimates. Non-tariff protectionist measures, such as stricter investment regulations, could magnify the impact, it added.
&w=3840&q=100)
First Post
6 hours ago
- First Post
PM Modi set to sign the India-UK FTA deal. Here's how India benefits
India and the United Kingdom are set to sign a free trade agreement (FTA) in the backdrop of Prime Minister Narendra Modi's visit to the UK. India and the UK have been negotiating this bilateral deal for years. India is also trying to negotiate a similar agreement with the United States. But what do we know about the India-UK FTA? What's in it? How do India and UK benefit? read more Follow us on Google News . The deal, which concluded in May, was hailed as 'historic' by Prime Minister Narendra Modi. India and the United Kingdom are set to sign a free trade agreement (FTA). The development comes in the backdrop of Prime Minister Narendra Modi's visit to the UK. India and the UK have been negotiating a deal for years. Modi will meet UK Prime Minister Keir Starmer and hold wide-ranging discussions with him. He will head to the Maldives next on July 25. STORY CONTINUES BELOW THIS AD India is also trying to negotiate a similar agreement with the United States. But what do we know about the India-UK FTA? What's in it? How do India and UK benefit? Let's take a closer look: What we know Negotiations for the deal began in January 2022 under the previous Conservative government. Then prime minister Boris Johnson had ordered negotiators 'to get it done by Diwali in October'. However, the talks over the deal have stretched on for years before concluding in May 2025. Modi in May hailed it as a 'historical deal'. This is India's first such agreement with another nation in over a decade. This is the UK's fourth trade agreement since Brexit. Bilateral trade between the two countries was at $55 billion in 2023/24. The deal includes a double contribution convention – also known as a social security pact – which will help Indian workers. This exempt Indian professionals and companies from social security contributions in the UK for three years — a move described by the Indian government as a 'huge win'. The idea behind it is to stop employers and employees from the burden of contributing to social security in multiple countries. The FTA is extremely detailed – comprising 26 chapters on goods, services, investment, and intellectual property rights. STORY CONTINUES BELOW THIS AD The deal will likely come into effect within a year. It is yet to be cleared by Britain's Parliament. India and the UK are negotiating a Bilateral Investment Treaty (BIT) on a parallel track. India has FTAs with Sri Lanka, Bhutan, Thailand, Singapore, Malaysia, Korea, Japan, Australia, UAE, Mauritius, the 10-nation bloc ASEAN (Association of Southeast Asian Nations), and four European nations' bloc EFTA (Iceland, Liechtenstein, Norway, and Switzerland). India is also currently negotiating FTAs with the US, Oman, the European Union (EU), Peru, and Israel. How India benefits The deal will allow 99 per cent of Indian exports to the UK to fall under zero-duty category. This will boost labour-intensive sectors such as textiles, leather, apparel and footwear, toys, marine product, gems and jewellery. Many of these currently face tariffs ranging from 4 per cent to 16 per cent. Engineering goods, auto components, electric and hybrid vehicles, and sports goods will also benefit. The double contribution pact will be of great help to Indian workers in the UK. It will exempt them from paying into social security for a period of three years. STORY CONTINUES BELOW THIS AD This will save them up to Rs 4,000 crore every year. Under such an agreement, an employee working in a foreign nation is exempt from paying into the social security programme of that nation. Representational Image/ Freepik. The deal will also give Indian yoga instructors, chefs, musicians, and other contractual workers temporary access to the UK. 'The UK is an important market for Indian exporters,' Ajay Sahai, director general of the Federation of Indian Export Organisation, said. It is expected to benefit firms such as Welspun India, Arvind Ltd, Bata India, Relaxo, Tata Motors, Mahindra Electric, and Bharat Forge. It will also increase the flow of investment to India. The UK is currently India's sixth-largest foreign investor. It has already invested $36 billion in India. British firms could partner with Indian companies under the FTA and receive benefits. 'This is a significant agreement,' Vikram Misri, India's foreign secretary, told reporters on Tuesday. Trade minister Piyush Goyal will accompany Modi for the formal signing, a commerce ministry official said. How UK benefits The UK has called this its 'biggest and most economically significant' deal since it signed a similar agreement with the EU. The government has called it a 'huge economic win for the UK' and a 'landmark trade deal'. India will eliminate tariffs on 90 per cent of UK goods. STORY CONTINUES BELOW THIS AD This includes cutting tariffs on Scotch whisky and gin to 75 per cent from 150 per cent. By year 10, this will be reduced to just 40 per cent. Cars being sent to India, which currently face 100 per cent tariffs, will be cut to just 10 per cent. Cosmetics, salmon, chocolates, medical devices, and biscuits will also see tariffs lowered under a quota. UK Prime Minister Keir Starmer The government has called it a 'huge economic win for the UK' and a 'landmark trade deal'. AP British consumers will get the benefits of these products becoming cheaper. Tariffs will also be cut on machinery and aerospace equipment. Firms such as Diageo and carmakers like Aston Martin and Jaguar Land Rover will get a boost. There are around 1,000 Indian companies operating in the UK who employ around 100,000 people. Indian businesses could further invest in healthcare, transport, and energy sectors under the FTA. Additionally, British firms investing in India could receive preferential treatment under the 'Make in India' policy. The Scotch Whisky Association has called the deal 'transformational' The deal is expected to boost the UK economy by $6.5 billion by 2040. STORY CONTINUES BELOW THIS AD Exports to India will increase by $21 billion by that year – around 69 per cent. UK firms will be allowed to bid for non-sensitive tenders in India above Rs 2 billion. The UK says it could allow access to around 40,000 tenders worth Rs 4.09 lakh crore every year.
