Cambodia has not been spared from the pervasive impact of the global economic downturn. Based on information available through September 2009, gross domestic product (GDP) is forecast by the Asian Development Bank (ADB) to contract by 1.5 percent and by IMF to contract by 2.75 percent in 2009. This is a drastic shift following double-digit growth throughout most of the last five years. The sharp decline in GDP, in foreign direct investment (FDI) and in export income highlights now more than ever that Cambodia must take a more proactive and deliberate approach to diversifying its economic base and increasing its economic competitiveness. Addressing these priorities will strengthen its economic foundation and reduce Cambodia’s high vulnerability to external shocks.

The economic and social impacts of the downturn in the past year have included significant job losses, reduced income for many households and a likely increase in food insecurity. This is mostly affecting the 30 percent of the population already living in poverty and the vulnerable near poor who are just above the poverty line. The direct impact on Cambodia is through its effect on the current major contributors to wages, employment and economic growth, namely FDI, the garment industry, the tourism sector, the construction industry and agriculture.