The Kingdom’s poverty and unemployment rate
could nearly double to 17.6 percent and 4.8 percent respectively because of the
impact of the pandemic, according to the UNDP’s economic and social impact
assessment of COVID-19 in Cambodia.
The brief assessment was launched by the UN
Development Programme (UNDP) on 8 October 2020 through careful consultation
with the Ministry of Economy and Finance (MEF) and other partners.
The impact assessment uses three-models – a
static general equilibrium model (CGE), a social accounting matrix (SAM) and a
global trade analysis model (GTAP) – to measure impact and model scenarios that
can mitigate further risks resulting from the pandemic.
Key findings of the assessment include the CGE
model estimate that economic growth could contract from an original 6.5 percent
for 2020 to –4.1 percent.
Under this scenario, the poverty rate could
nearly double to 17.6 percent and unemployment could rise to 4.8 percent,
according to the report.
According to the government data, the Kingdom’s
poverty rate has been reduced dramatically, from 53.2 percent in 2004 to around
10 percent in 2019.
However, with a social protection stimulus of
3.5 percent of GDP, would limit GDP contraction to –3.3 percent and lessen the
impact on unemployment and poverty to 4.4 percent and 14.2 percent,
respectively.
The report shows that this social protection
stimulus would prevent 570,000 people from sliding back into poverty.
Nick Beresford, UNDP Resident Representative
said that the model has made clear that social protection is better seen as an
investment than a cost – acting to both stimulate growth and alleviate poverty.
“The modelling of economic and social impacts
can help us better understand the impact of this global pandemic on Cambodia
and how we can best design stimulus packages in response,” he said.
He said UNDP has contributed to the training of
Government officials from MEF and other line ministries on a range of key
modelling tools to build data, improve risk assessments through modelling and
scenario building, and in turn to promote evidence-based policies that can
mitigate those risks.
“UNDP has also supported the rollout of the
Government’s COVID-19 IDPoor cash transfer programme, and later this year will
trial a graduation-based scheme that delivers a combination of assets and cash
to around 3,000 households,” he said.
Hong Vannak, a business researcher at the Royal
Academy of Cambodia, said that operational suspensions in manufacturing, mainly
garment and textile and tourism has pushed up unemployment, while the returning
of migrant workers from Thailand are also a key factor in unemployment rate.
“I am still proud of the government’s measures
to curb the spread that is hurting the economy and the predicted jump in the
poverty rate and unemployment is not a major concern,” he said. “The use of government
budgets to help vulnerable people and workers, who lose their jobs will
mitigate the risk of poverty rise.
Cambodia is highly exposed as it relies on a
narrow economic base built from garments, tourism, agriculture and
construction.
According to a report, garments (including
textiles and footwear) are predicted to decline 13.1percent in output and a
20.1 percent reduction in export demand, while the output of construction will
decline by 10.6 percent with 24 percent reduction in project approvals.
Hotels and restaurants are predicted to decline
13.3 percent with a 42 percent reduction in international tourist arrivals and
30 percent in domestic tourists.
In response to the pandemic, the Government has
proposed a series of stimulus packages involving the expansion of social
protection and tax relief. According to government budget information, the
funds for these measures will likely come from reallocating of funds for some
capital projects.
Social protection, especially social
assistance, has emerged as the most important stimulus to protect lives and
livelihoods during COVID-19.
Following these developments at the global
level, the UN system proposed a 3.5 percent social protection stimulus for
Cambodia, meant to both protect lives and livelihoods, and propel the economy.
The government has already been sending out
nearly $30 million per month since June to support the vulnerable and
unemployed workers which the number of people has also increased from 500,000
to 700,000 families.