No one is sure who first said it, yet it remains a truism that there are three types of lies: “Lies, damned lies and statistics.”
Recent reports from China’s Xinhua and several Phnom Penh-based newspapers about Cambodia’s economic prospects this year have given some reason for cheer. According to them, the World Bank’s latest economic update forecasts Cambodia’s gross domestic product (GDP) to grow by 4% in 2021 after having contracted by 3.1% last year.
However, that is not exactly what the World Bank said in its report published on June 16. Given the worsening pandemic situation in Cambodia, which is still spiking upwards, the World Bank made two forecasts: one most positive and one most pessimistic.
The 4% figure reported by several newspapers, mostly those aligned to the ruling Cambodian People’s Party (CPP), is actually the most positive forecast scenario.
What went unreported by most of these papers was the World Bank’s pessimistic forecast – its “downside scenario” – which predicted the economy would only grow by 1% in 2021.
“The downside scenario assumes a deterioration in domestic economic conditions caused by repeated lockdowns and travel restrictions as efforts to contain the outbreaks are not successful, preventing economic recovery from taking hold, regardless of improvements in external conditions,” the report stated.
There’s also the question of how one reads the numbers. For instance, investment approved by the Council for the Development of Cambodia in the first quarter of 2021 was worth US$679 million, slightly higher than investment in Q1 and Q4 2020.
Yet, of the $6.4 billion worth of investment approved last year, $3.5 billion came from one project alone – the casino operator NagaCorp’s planned expansion in Phnom Penh, according to central bank data.
And Q1 of this year saw $679 million worth of investment split across only 28 different projects, one of the smallest number of investment projects in recent years.
Worse still, could the World Bank’s most pessimistic forecast for 2021 actually be overly optimistic?
In May 2020, the World Bank published its first economic update for Cambodia since the Covid-19 pandemic started months earlier. It, too, made two different forecasts.
The positive “base case scenario” forecast GDP to contract by 1% in 2020. Its pessimistic “downside scenario” forecast a contraction of 2.9% for 2020.
As we now know, Cambodia’s economy actually contracted by 3.1% last year, so worse than the World Bank’s most pessimistic forecast.
And furthermore, it should be remembered that the downside scenario forecast of 1% growth this year was compared with 2020, not 2019.
Like every country, Cambodia is racing to vaccinate as many people as possible in the hope that normalcy in freedom of movement will restore economic normalcy.
At present, it does not appear that the latest wave of the pandemic that started in late April and which has now seen infection rates rocket to 45,336 as of June 24 is close to topping off.
Some 32% of all infections since the pandemic started were recorded between June 1 and 24, and 98.1% since May 1. The current death toll stands at 493.
Lockdowns have been imposed since the second half of April, although some restrictions have been lifted or eased despite soaring infection numbers.
On a positive note, Cambodia is the second-best performer in Southeast Asia, after Singapore, with its vaccination policy. Some 21.6% of the population has received at least one dose, and 16.5% are fully vaccinated, according to Our World In Data.
On June 23, 0.53 doses per 100 people were administered and Reuters analysis finds that about 94,000 doses were being administered each day, which suggests it would take just one a month to vaccinate a tenth of the population.
This rate may slow down as the vaccination campaign extends to harder-to-reach rural areas and for people less at risk, yet if the supply of vaccinations remains constant then it is probable that Cambodia can vaccinate at least half its population this year.
Even so, many of the economic problems now dogging Cambodia existed before the pandemic started.
High debt in the banking and microfinance industries, over-dependence on China, a manufacturing sector dominated by the low-value-added assembly of garments and footwear, as well as chronic corruption and money laundering, all endure.
The European Union’s partial removal of Cambodia’s trade privileges, the result of democratic deterioration in Phnom Penh, has already affected exports, but the pandemic has masked the true extent.
The World Bank’s latest report was subtitled “road to recovery,” yet the CPP government has before it several paths from which to choose.
It could simply choose to return to how the economy was pre-pandemic or decide that rebuilding allows for change. This would mean trying to steer away from a dependence on tourism, low-cost assembly, as well as dependency on China, and towards higher-value-added sectors and diversified trade partners.
So far, no decision on that appears to have been made.
The government might also choose to play an increasingly active role in the economy, something the CPP hasn’t liked to do in the past, preferring to run a laissez-faire system since the 1990s.
The World Bank speculated that 2021 could be the first year that domestically financed public investment exceeds externally financed public investment.
But this has political, not just economic, considerations. In late 2017 the government forcibly dissolved its only real political opponent, the Cambodia National Rescue Party (CNRP), which was spuriously accused of plotting a US-backed coup.
Its MPs were dismissed and most fled into exile while its president, Kem Sokha, was arrested for treason in September 2017. His case remains delayed. Most of the party’s grassroots activists have now either been jailed, harassed or bought into silence.
Yet that doesn’t mean Prime Minister Hun Sen, in power since 1985 and still going strong, has it all his own way and the ruling party has a nervous eye on local elections next year and a general election in 2023.
Without the CNRP or any other viable opposition party on the ticket, these elections will be treated as referenda on the CPP’s rule. Low voter turnout or high levels of spoiled ballots will be considered a means of showing displeasure.
At the 2018 general election, in which the CNRP was barred from participating, more people spoiled their ballots than voted for the second-place party, a clear protest by the Cambodian electorate.
Typically, the year leading up to and including the election cycle is marked by largess from the ruling party, with voters offered higher wages and increased state expenditure on social development projects.
Does the government try to remain fiscally conservative and balance the budgets? The World Bank warns: “Public debt and budget pressures have risen sharply and are likely to persist, and the authorities will need to consider options for restoring fiscal discipline once the recovery takes hold.”
Or, if it reckons taking on more public debt is worth the risk, does it spend that money on things vital for the economy or things that will improve the ruling party’s image?
If the pandemic has taught us anything, countries that performed the best planned for the worst and hoped for something better. Those countries that suffered considerably did the opposite.
When it comes to Cambodia’s economic recovery, there’s no reason for hubris at this moment.