Coup deals economy severe blow
Projections for economic growth were cut by more than half as a result of last month's coup, Minister for Economics and Finance Keat Chhon said yesterday.
Observers feared tough times were likely to follow the post-coup economic slowdown and might lead to social unrest.
'We had good growth last year of about 6.5 per cent, but this year I don't think we will see more than 3 per cent growth,' the finance minister said, adding the burgeoning tourism sector had been badly hit.
Mr Chhon said it was too early to assess the full economic impact from factional fighting in July which saw elected First Prime Minister Prince Norodom Ranariddh deposed by his former coalition partner, Second Prime Minister Hun Sen, but it was likely to be significant.
'Even the most optimistic economic scenario is not so good,' he said, adding Cambodia had effectively lost US$100 million in foreign aid this year due to freezes in the wake of Hun Sen's power grab.
With the exception of Germany and the United States, which said they would assess developments in the coming months before deciding on the future of their aid programmes, most of Cambodia's principal donors reintroduced all or some of the programmes suspended soon after fighting broke out in Phnom Penh.
Mr Chhon said the government, which depends on donors for almost half its budget, faced an economic crisis and that spending would have to be reined in.
'I have told the royal government that we have little money. I have told them that we have to make savings on overseas travel and fuel and power costs,' Mr Chhon said.
The tourism industry, which earned the government $100 million last calendar year, and promised to earn more this year, had suffered a 'dramatic' slump, he said.
'We are expecting a fall of revenue from tourism by about 25 per cent this year, fortunately we had a very strong first half,' Mr Chhon said.
Expatriate businessmen confirmed the fighting had an 'enormous' impact on the economy and had resulted in 'many millions' of dollars of investment being withdrawn from Cambodia.
Roy Barram, managing director of construction company Roymar Services, said the fighting resulted in the cancellation of seven contracts with his company worth $19.5 million.
'Basically the inactivity since the fighting has wiped out everything we made up to July and I expect things to get worse from here,' he said, adding the company had not signed a new contract for two months.
Mr Barram said the slump in business had forced him to lay off 450 workers and that it was 'highly unlikely' they would find new jobs that paid as well.
