Phnom Penh, 23 November 2022 – A policy brief on the 2022 Economic and Social Impact Assessment of COVID-19 and War in Ukraine on Cambodia was launched today by the UN Development Programme (UNDP), the Ministry of Economy and Finance (MEF), the Ministry of Social Affairs, Veterans and Youth Rehabilitation (MoSVY) and the UN Joint SDG Fund. The assessment uses a computable general equilibrium (CGE) model with real economic data to simulate shocks and examine the reaction of the economy considering the impact of rising fuel, food and fertilizer prices, in addition to the global economic slowdown and its impact on demand for Cambodian exports, the tourism sector and construction sector investments.
Findings in the brief suggest that Cambodia’s 2022 GDP is expected to decelerate from the pre-war in Ukraine estimation of 5.4 percent to 4.9 percent, taking into account the positive effect that social protection and other mitigation measures have on the economy. Increases in the poverty rate were also found to be mitigated by the implementation of social protection measures. The poverty rate is estimated at 15.2 percent, which is slightly higher than the pre-war estimation of 15.0 percent, but 0.5 percentage points lower than the projection with no social interventions. This translates to the prevention of around 85,000 people from falling back into poverty. Due to the contraction of the economy, the model estimates 1.25% of unemployment in 2022 as compared to 1.12% in the pre-war estimation. The unemployment rate may increase to 1.45% without social protection measures.
“Although Cambodia is recovering from the pandemic, the recovery is slowed down by uncertainties driven largely by external shocks,” commented Ms. Alissar Chaker, UNDP Resident Representative in Cambodia.
Based on these findings, Ms. Chaker shared several policy recommendations, highlighting the need to “focus on building the socio-economic resilience of the country and enhancing its preparedness for absorbing future shocks. This includes doubling down on investments in human development, optimizing and expanding social protection, fostering a just energy transition and green economy, managing energy security, and accelerating an inclusive and whole-of-society digital transformation.”
H.E. Tep Phiyorin, Under Secretary of State, MEF, acknowledged the value of updating the CGE model for Cambodia, as it “serves as important policy input to support the Royal Government of Cambodia in formulating responses to overcome the impacts of the pandemic and additional shocks that the country is now facing.” H.E. Tep Phiyorin also added, “The Royal Government of Cambodia has prioritized the people’s well-being as the first priority in the 2023’s budget.”
“The modelling revalidates the importance of developing the social protection system in Cambodia,” said H.E. Samheng Boros, Minister attached to the Prime Minister and Secretary of State, MoSVY. “It clearly shows that social protection measures have a central role to play in protecting the Cambodian economy and its people from unforeseen challenges like the COVID-19 pandemic and war in Ukraine.”
In addition to its technical assistance, UNDP is supporting the delivery of a training programme on modelling tools, including CGE, to professional economists at MEF. This will support the development of institutional and individual capacities and systems to produce traditional and innovative data, as well as to strengthen reporting mechanisms. With this data, up-to-date information can be provided to planners and policymakers to advance integrated development solutions that accelerate the achievement of the Sustainable Development Goals and Cambodia’s development ambitions.