How the global credit crisis is effecting Cambodia

The global credit crisis seems to effect the fortunes of developing nations in two ways. First, aid to those countries decrease. For countries like Cambodia, they depend on aid to meet their government budgets. Later, export sales will slow down. As the rich countries who were hit hard by the credit crisis will have less money to buy goods from the developed world.

Cambodia has had a respectable growth rate in recent years. However, the country has a steep inflation rate of 25%.

As found in the Phnom Penh Post, government officials explained why the credit crisis will keep them from sustaining their growth this year.

GLOBAL financial turmoil and rising domestic inflation likely will keep Cambodia from reaching its poverty-reduction target this year, Commerce Minister Cham Prasidh has said, adding that a worsening economy has pushed more Cambodians below the poverty line.

"Every year we have been able to lower poverty by one percent, but the global financial crisis could affect this," Cham Prasidh said.

While Cambodia continues to post impressive economic growth estimated at around 6.5 percent, roughly a third of the population are still living on less than US$1 a day.

Cham Prasidh, speaking Tuesday at a gathering of industry and trade officials, said that one percent of Cambodians - around 140,000 people - have fallen below the poverty line this year.

However, the Asian Development Bank, in an update of its 2008 economic outlook assessment released in September, presented a dramatically higher figure, saying, "preliminary evidence suggests that as many as two million people may have slipped below the poverty line, in addition to 4.5 million already in poverty".

Some officials fear the global market turmoil could impact the ability of donors to continue doling out massive aid packages to poor nations like Cambodia, which depends on international funds for a significant percentage of its national budget.