The International Monetary Fund (IMF) says the Cambodian economy remains on its post-pandemic recovery path but faces 'significant' downside risks in both the short and medium terms. In its annual assessment of Cambodia released Thursday, the IMF executive board said the economy was "continuing to recover from the pandemic' with growth forecast at 5.3 percent this year - up from an estimated 5.2 percent last year. 'The main drivers of growth are the expansion of non-garment goods exports and a rebound in tourism. 'But garment exports, a major contributor to growth in the past, remain weak. And the compositional shift in tourist arrivals means the country is receiving less income per tourist compared to the pre-pandemic era.' 'Though the rebound has continued, downside risks are significant,' the executive board warned. 'Near-term threats to growth include continued demand weakness from advanced-economy trade partners, recovery slowdown in China, high level of private debt domestically and tighter global financial conditions. 'Over the medium term, geopolitical tension and trade fragmentation, structural decline in growth from China, as well as climate change may pose important challenges to growth." SUBSTANTIAL REFORMS NEEDED Fiscal policy was 'appropriately expansionary' last year, the board said. 'But as recovery progresses, fiscal consolidation should start.' At the same time, 'monetary policy needs to continue normalising towards the pre-pandemic setting.' To make sure Cambodia's increasing living standards are sustained over the medium term, 'substantial reforms are needed,' the board said. 'Human capital, both quality and quantity, needs to improve to accommodate the changing needs of the economy, as the comparative advantage in labour cost diminishes at a higher income level." The board also urged investing in infrastructure - like transport, energy, logistics and telecommunications - to help diversify industry and increase scales of operation. GOVERNANCE REFORMS IMPORTANT Governance and anti -corruption reforms are seen as 'important' to attract new foreign investment and sustain high growth. "Improvements in public governance and anti-corruption will reduce the cost of doing business, help draw investments from a wider range of source countries and improve Cambodia's attractiveness as a tourist destination. "It is critical to strengthen frameworks on asset declarations, whistleblower protection and access to information. Adequate resources and authorities should be allocated to oversight and investigative bodies.' Source: Agence Kampuchea Presse