Remarks by Ms. Alissar Chaker, UNDP Resident Representative
Launch of the Policy Brief “Economic and Social Impact Assessment of COVID-19 and War in Ukraine on Cambodia”
November 23, 2022
H.E. Samheng Boros, Minister attached to the Prime Minister and Secretary of State, Ministry of Social Affairs, Veterans and Youth Rehabilitation
H.E. Tep Phiyorin, Under Secretary of State, Ministry of Economy and Finance
Senior officials from the government, diplomatic corps, development partners, UN agencies,
Excellencies, ladies and gentlemen!
It is my pleasure to welcome you to the launch of the Policy Brief on “Economic and Social Impact Assessment of COVID-19 and War in Ukraine on Cambodia.” It is the third policy brief on the socio-economic outlook in Cambodia since the onset of the pandemic in 2020, and one of the results of a long-standing partnership between the Ministry of Economy and Finance and UNDP. The policy brief benefitted from insights by the Ministry of Planning among other stakeholders, to ensure the needed depth of analysis for supporting the Royal Government of Cambodia in designing policy responses that would minimize the impacts of the geopolitical crisis and foster inclusive and resilient socio-economic recovery.
Funding for this analysis was secured from the UN Joint SDG Fund under the framework of a Joint Programme titled “Strengthening Cambodia’s Socio-Economic Resilience to Global Crises and Food System Shocks” implemented by UNDP, FAO, WFP, and UNICEF.
While the country’s economy started showing signs of rebound after two years of pandemic, the new global crisis triggered by the War in Ukraine brought a new series of uncertainties and socio-economic vulnerabilities for many countries in the world. Cambodia was no exception, with the national economy impacted by fuel, food, and fertilizers prices hike.
The 2022 combined Economic and Social Impacts of COVID-19 and the war in Ukraine, subject of today’s gathering, were assessed by deploying a Dynamic Computable General Equilibrium (DCGE) model. This model provides an updated socio-economic outlook of Cambodia’s economy from 2022 to 2025, considering both the impact of rising fuel, food, and commodity prices, and the global economic slowdown.
Allow me to highlight some of the price trends observed through the year:
- The FAO Food Price Index shows that the global food price was 22.8% higher during the first quarter than during the same period of last year with some decline observed towards the end of the year. This global food price increase is estimated to cause about 20% increase in food prices in Cambodia for 2022.
- Similarly, the retail price of gasoline and diesel increased by 45% and 67% respectively on a year-over-year basis in May 2022 according to the WFP market update. However, the prices of both gasoline and diesel seem to have stabilized at lower levels in the second quarter due to government intervention.
- The average price of imported fertilizers rose by 32.9% in the first quarter due to supply disruptions of major exporters, as per the General Department of Customs and Excise of Cambodia. However, it is likely that the retail price of fertilizers could increase up to 50% by the end of 2022.
Based on the above, the analysis developed four scenarios. These will be presented in detail during the meeting, but let me just summarize some of the key findings:
- According to the most likely scenario of the model, GDP growth estimation for 2022 was revised from 5.4% to 4.9% due to food, fuel and fertilizers price surge, and increased uncertainties associated with the slow-down of the global economic recovery. This estimate considers, nonetheless, the positive effect of social protection and other mitigation measure implemented by the Royal Government to reduce the losses.
- Due to the decrease in household income and consumption, the monetary poverty rate is, accordingly, estimated at 15.2% in 2022. This result is slightly higher than the pre-war estimation (15%) but 0.5 percentage points lower than projections that do not consider social protection interventions, which would be of 15.7%. In a country of almost 17 million people, this means that around 85,000 people were saved from falling back into poverty.
- In terms of unemployment the trend is similar. 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. The employment situation would improve in 2024 and 2025 because of better economic performance.
The analysis shows that recovery is slowed down by uncertainties driven largely by external shocks. Thus, it is recommendable to build the socio-economic resilience of the country and enhance its preparedness for absorbing future shocks This would include:
- First, doubling down on investments in human development, specifically in education and health by making these essential services accessible and affordable to all with a progressive fee structure. This would also boost the productivity of the labor force.
- Second, optimizing and expanding social protection, such as IDPoor Cash Transfer Programme, which in the wake of the COVID-19 pandemic, has shown its effectiveness in reducing development gains losses, namely poverty and employment, and stimulating local economy. We welcome the decision of the Government to expand social protection coverage to ‘at-risk population’ in 2023. However, we call for further investment in poverty pockets for poor and vulnerable people, with particular attention to women, to reduce inequalities and enhance resilience. This would need a different approach in assessing poverty and deprivation that goes beyond monetary measures, preparing hopefully for a gradual movement towards a fit-to-purpose and affordable universal access to social protection.
- Third, fostering an ecosystem for inclusive social, economic, and technological innovation. Just energy transition and green economy would not only promote the country’s green credentials, but also foster the creation of new jobs and the country’s competitiveness in a very dynamic ASEAN sub-region, with a leapfrog on its development path. Moreover, managing energy security is critical given the increased vulnerability associated with dependency on energy imports due to shocks that could result from sharp inflation and the debt situation in neighboring countries. Increasing the share of domestic renewable energy and its diversification, encouraging modal shifts (such as for example, electric mobility) and energy efficiency are some of the recommended options for the way forward.
- Finally, accelerating an inclusive and whole-of-society digital transformation for a 21st Century Cambodia to build ownership, support access to human-centered solutions, mitigate risks, and establish accountability.
Excellencies, ladies and gentlemen,
I would like to refer to the 2022 UNDP Human Development Report which showed that the pandemic led to unprecedented reversals in the Human Development Index in 90% of the countries. Cambodia has lost during the pandemic hard earned development gains and has regressed to the 2018 levels. The is sad news, but I should also note that this is a relatively better performance compared to the global regression average, which is for most countries a return to 2016 levels. This shows that Cambodia’s response was efficient in slowing and limiting the losses. However, it is also a reminder that further investment in people, especially the poor and the vulnerable, is crucial and is still needed.
UNDP will continue supporting collective efforts to accelerate progress towards the 2030 Agenda for Sustainable Development and for an inclusive, green, and durable Least Developed Country (LDC) graduation. A key element for future success is the continued dialogue and cooperation among policymakers, UN agencies and development partners, civil society, and the private sector.
I am very much looking forward to hearing the insights of the distinguished panelists and the audience feedback during the next sessions.