Lower-middle Income Ranking Increases Pressure on Government

Despite some appearances to the contrary, things in Cambodia are looking pretty rosy… at least according to the World Bank. In its latest revision of world economies the Bank raised Cambodia’s status from a low-income economy to a lower-middle income country.

The reclassification to a lower-middle income economy is based on the Banks estimate that Cambodia gross national income (GNI) per capita for 2015 reached the required threshold of US$1,026, after hitting $1,020 in 2014.

The upgrade comes less than two months after the World Bank resumed lending to Cambodia after it froze all new loans in 2011 in the wake of controversy surrounding the Boeung Kak Lake dispute.

The upgrade is good news for the Cambodia government and its ongoing attempts to battle poverty and improve income levels as the country’s economy races along at an average growth rate over the past five years of 7.16 per cent, and an impressive 8.1 per cent per annum average over the last 20 years.

Cambodia joins 51 other economies including Lao PDR, Vietnam and the Philippines who have seen economic growth push them into the lower-middle income bracket.

Cambodia’s 8.1 per cent per annum average growth rate over the last 20 years has seen it elevated to a lower-middle income country

The upgrade to a lower-middle income economy, however, means that Cambodia will no longer be eligible for a range of soft loans, grants and development packages, as well as highly favourable trade privileges, putting increased pressure on the government to support the country’s continued social development through trade and investment.

The World Bank uses a country’s income level to determine which to lend to and at what interest rate. The Asian Development Bank (ADB) also uses a similar GNI-based classification on its lending criteria. Last year the ADB approved projects in Cambodia totalling $223.1 million, including $90.6 million under cofinancing for investment projects and $1.5 million for technical assistance.