Cambodia’s Macroeconomic Progress

A Journey of 25 Years

October 05th, 2016

1

Contents

1. GDP Performance 2. Sectoral Performance

3. Fiscal Performance 4. Financial Sector Performance

5. Global and Domestic Challenges 6. Ways Forward

2

Key Development Highlights

- Economic Status: Low Income- Economic structure: agriculture-based - Nominal GDP: $5.3 Billion - GDP per capita: $417 - Poverty rate: 53.2% - Gini Coefficient: 0.38% - Unemployment rate: 1% - Total trade volume: $5,857 million - Export: $2,588 million - Domestic Revenue: 2,220 Billion Riels- Asian financial crisis led to weaker economic growth in 1998.

- Economic Status: Lower Middle Income

- Economic structure: Less agriculture dependent

- Nominal GDP: $19.8 Billion - GDP per capita: $1,300- Poverty rate: 13.5% (2014)- Gini Coefficient: 0.29 (2014)- Unemployment rate: 0.1% (2014)- Total trade volume: $22,035 million - Export: $9,231 million- Domestic Revenue: 14,359 billion Riels- Financial sector: Rapid-growing yet

stable- Internal and external balance

- IDP: skill-driven industry by 2025 - Vision 2030: Upper middle income economy- Vision 2050: High income

2 Decades ago

2016

Going forward

2004

1993- Economic Status: Low Income- Economic structure: agriculture-based - Nominal GDP: $2.5 Billion- GDP per capita: $229 - Total trade volume: $769 million- Export: $283 million - Domestic Revenue: 290 Billion Riels

3

1. GDP Performance

4

Cambodia’s economic prospect remains robust, yet vulnerable to both internal and external risks…

Major Growth Drivers

1st Construction(Contribution to GDP growth 1.23%)2nd: Garment(Contribution to GDP growth 1.17%)

1st: Garment(Contribution to GDP growth 1.73%)2nd: Construction (contribution to GDP growth 1.25%)

Source: National Institute of Statistics, Ministry of Planning, 2016Note: MEF team’s projection for 2016 and 2017

GD

P gr

owth

and

Sec

tori

al C

ontr

ibut

ion

to g

row

th

9.1%

8.1%

6.6%

8.5%

10.3%

13.3%

10.8%10.2%

6.7%

0.1%

6.0%

7.1% 7.3% 7.4% 7.1% 7.0% 7.0% 7.0%6.8%

6.7%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

1994 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016e 2017p 2018p 2019p

Agriculture Industry Services GDP Growth

- Yearly average growth (1996 - 2015): 7.7%- Nominal GDP:

+ 1996: 3,486 Million USD+ 2015: 18,078 Million USD

- GDP per capita: + 1996: 295 USD+ 2015: 1,215 USD

5

Cambodia is gradually transforming into an industrialized economy…

Source: National Institute of Statistics, Ministry of Planning, 2016Note: MEF team’s projection for 2016-2019

45.3%

35.9% 34.3%31.1% 32.0% 29.4% 30.7% 30.1% 29.7% 32.8% 33.5% 33.9% 34.6% 33.5% 31.6% 28.9% 26.6% 25.7% 24.6% 23.7% 23.0%

12.6%21.9% 22.3%

24.3% 25.0%25.6% 25.0% 26.2% 24.9% 22.4% 21.7% 21.9% 22.1% 23.0% 24.1%

25.6% 27.7% 29.1% 30.3% 31.1% 31.8%

39.4% 37.1% 38.4% 39.3% 38.2% 39.3% 39.1% 38.7% 38.5% 38.8% 38.8% 38.3% 37.5% 37.8% 38.5% 39.7% 39.8% 39.2% 39.0% 38.8% 38.6%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1993 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016e 2017p 2018p 2019p

Agriculture Industry Service

Share of industry continues expanding while that of agriculture is shrinking...

57.4% 57.7% 55.6% 57.6% 54.2% 55.8%51.0% 48.7% 45.3%

13.3% 14.9% 15.8%15.9%

16.2%16.9%

18.6% 19.9% 24.3%

29.1% 27.4% 28.6% 26.5% 29.6% 27.3% 30.4% 31.5% 30.4%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

2004 2007 2008 2009 2010 2011 2012 2013 2014

Agriculture (Primary) Industry (Secondary) Services (Tertiary)

Share of Employed Population by

Increasing labor share in industry….

Source: Ministry of Planning, 2015

6

Source: National Institute of Statistics, Ministry of Planning, 2016Note: MEF team’s projection for 2016 - 2019

Nominal GDP increased 8 folds from 1993 to 2016…

2,4803,649 3,984 4,280 4,663

5,3396,293

7,2758,631

10,337 10,40011,634

12,96514,054

15,229

16,79618,078

19,843

21,983

24,065

26,472

-

5,000

10,000

15,000

20,000

25,000

30,000

1993 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016e 2017p 2018p 2019p

Mill

ion

USD

7

Given its robust growth rate of 7.7% for the last 2 decades, Cambodia has become one of the 8th Olympians of growth, making it the sixth faster growing country in the world over that period…

Source: World Bank8

Lower middle-income economy with inclusive growth…..

Source: National Institute of Statistics, Ministry of Planning, 2016Note: MEF team’s projection for 2016 – 2019

0.38

0.41

0.38

0.34 0.34

0.31 0.29 0.27 0.295

53.2%

47.8%

29.9%

22.9% 21.1%19.8%

18.9%

16.0% 13.50%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

2004 2007 2008 2009 2010 2011 2012 2013 2014

Gini Coefficient (Left Axis) Poverty Rate (Right Axis)

Cambodia has been world leader in poverty reduction…

Source: Ministry of Planning (for poverty rate and Gini coefficient from 2007 to 2014)World Bank (for poverty rate in 2004)

229

288319 340

367417

487

558

656

760 753

830

911

973

1,042

1,138

1,215

1,300

1,422

1,537

1,669

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

1993 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016e 2017p 2018p 2019p

USD

GDP Per Capita increased 5.6 times from 1993 to 2016…

9

10

GiniCoefficient 2004 2005 2006 2007 2008 2009 2010 2011 2012

Thailand 0.43 n/a 0.42 0.40 0.40 0.40 0.39 0.37 0.39

Vietnam 0.37 n/a 0.37 n/a 0.38 n/a 0.43 n/a 0.39

Lao PDR n/a n/a n/a 0.37 n/a n/a n/a n/a 0.38

Philippines n/a n/a 0.44 n/a n/a 0.43 n/a n/a 0.43

Indonesia n/a 0.34 n/a n/a 0.34 n/a 0.36 n/a n/a

Povertyrate (%) 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Thailand 26.8 .. 21.9 20.0 20.4 17.9 16.4 13.2 12.6 10.9 10.5

Vietnam .. .. .. .. .. .. 20.7 .. 17.2 .. 13.5

Lao PDR .. .. .. 27.6 .. .. .. .. 23.2 .. ..

Philippines .. .. 26.6 .. .. 26.3 .. .. 25.2 .. ..

Myanmar .. .. .. .. .. .. .. .. .. .. ..

Indonesia 16.7 16.0 17.8 16.6 15.4 14.2 13.3 12.5 12.0 11.4 11.3

Malaysia 5.7 .. .. 3.6 .. 3.8 .. .. 1.7 .. 0.6

Source: WDI, World Bank, 2016

Gini Coefficient and Poverty Rate in Asia

Cambodia Has Been One of The “MDG Trailblazers”, Although StillLags Behind in Some Human Development Dimensions

11

2. Sectoral Performance

12

Industry sector remains driven by garment sector, however, increased domestic production has beenobserved in other sectors, i.e. food and beverages, light manufacturing industry…

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016e 2017p 2018p 2019pGarment 68.2 28.4 21.4 16.8 24.9 9.2 20.4 10.0 2.2 (9.0) 18.5 19.9 6.5 10.7 6.6 9.8 10.3 9.7 8.7 7.8Construction 36.8 (1.8) 27.1 11.1 13.2 22.1 20.0 6.7 5.8 5.0 (25.5) 7.9 18.2 13.7 21.4 19.2 15.9 13.4 10.4 10.0Other industry 0.9 (1.0) 3.3 3.9 2.3 12.4 11.0 6.0 7.2 (27.8) 63.5 6.2 10.2 8.4 9.6 9.3 9.4 9.4 9.2 9.2Industry Sector 31.2 11.2 17.1 12.0 16.6 12.7 18.3 8.4 4.0 (9.5) 13.6 14.5 9.3 10.7 10.1 11.7 11.4 10.5 9.2 8.6

(40.0)

(20.0)

-

20.0

40.0

60.0

80.0Growth of Industry and Its Sub-sectors

Source: National Institute of Statistics, Ministry of Planning, 2016Note: MEF team’s projection for 2016 - 2019

Gro

wth

in P

erce

nt

13

Service sector growth remains subdued, mainly driven by the slowdown of tourismand real estate sector…The slowdown of tourism sector is offset by growth of domestic trade, coupled with transport and communication...

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016e 2017p 2018p 2019pHotels and Restaurants 19.0 22.6 18.8 (16.8) 23.4 22.3 13.7 10.2 9.8 1.8 11.2 6.6 12.5 13.8 6.1 2.4 2.2 3.0 2.9 2.7Other Services 7.9 9.8 6.3 9.0 12.1 12.0 9.7 10.1 8.9 2.4 2.3 4.8 7.5 7.9 9.2 7.8 7.4 7.4 7.3 7.4Service 8.9 11.1 7.7 5.9 13.2 13.1 10.1 10.1 9.0 2.3 3.3 5.0 8.1 8.7 8.7 7.1 6.7 6.8 6.8 6.8

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

(20.0)

(15.0)

(10.0)

(5.0)

-

5.0

10.0

15.0

20.0

25.0

30.0Growth of Service and its Sub-sectors

Source: National Institute of Statistics, Ministry of Planning, 2016Note: MEF team’s projection for 2016 - 2019 14

Despite slight recovery, growth of agriculture remains slow due to sluggish commodity pricesand delay in implementing supporting policies…

A continued decline in fisheries, low rice production and low growth of livestock and poultry remain challenges...

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016e 2017pFisheries 5.0 5.9 0.6 1.7 -1.7 5.6 3.8 0.8 6.5 6.0 2.4 3.1 6.7 5.4 0.1 0.3 -0.1 -0.5Crop 2.4 0.6 -4.8 21.9 -2.3 27.6 5.3 8.2 6.6 5.8 5.7 4.3 4.9 0.6 0.5 0.3 1.0 1.7Livestock and Poultry -8.8 10.8 -1.1 5.7 3.9 5.6 8.2 3.7 3.8 5.0 2.1 0.2 0.8 0.1 0.2 0.0 0.8 0.3Forestry and Logging -12.4 -1.5 -4.3 -3.0 0.8 5.1 7.0 1.1 0.9 1.1 0.2 -0.1 -2.5 -2.9 -1.2 -0.8 -1.6 -1.6Agriculture -0.4 3.6 -2.5 10.5 -0.9 15.7 5.5 5.0 5.7 5.4 4.0 3.1 4.3 1.6 0.3 0.2 0.5 0.8

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

20.0

25.0

30.0

Source: National Institute of Statistics, Ministry of Planning, 2016Note: MEF team’s projection for 2016 - 2019 15

Inflation remains favorably low under 5% due to the low level of oil and commodity price...

Source: National Institute of Statistics, Ministry of Planning, 2016Note: MEF team’s projection for 2016 and 2017

-0.8% -0.9%

-0.1%

1.2%

3.9%

5.8%4.7%

5.9%

19.7%

-0.6%

4.0%5.5%

2.9% 3.0%3.9%

1.2%2.8%

3.7% 4.2%3.2%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016e 2017p 2018p 2019p

Inflation in Riel (% increase, year average)

16

Cambodia’s overall balance of payment remains stable, with continued compression of trade and current account deficits, thanks to the increased domestic production…

Source: National Bank of Cambodia, 2016Note: MEF team’s projection for 2016 - 2019

Balance of Payment

2011 2012 2013 2014 2015 2016e 2017p 2018p 2019pExport 38.9 40.1 42.9 44.1 46.8 46.2 46.2 47.2 47.2Import 55.4 57.9 64.0 63.2 66.0 64.1 63.0 62.5 61.5FDI 10.4 12.1 12.0 10.0 9.1 10.3 10.5 10.6 10.9Trade Balance -14.3 -17.8 -21.1 -19.1 -19.2 -17.9 -16.8 -15.4 -14.3Current Account Balance (including official transfer) -5.9 -8.2 -13.0 -9.8 -9.6 -9.1 -8.5 -7.5 -6.8

-30.0

-20.0

-10.0

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

% o

f GD

P

17

Export Product Diversification: From garment export to rice and others (electroniccomponents, bikes...)

Source: Ministry of Economy and Finance, 2016

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Others (Electronic components, bicycles, etc.) 3.2% 6.1% 3.6% 1.9% 2.6% 2.0% 2.3% 2.4% 9.4% 7.8% 7.4% 12.6% 16.6% 21.5% 21.1%Rubber 1.8% 0.3% 1.0% 1.8% 1.6% 1.5% 1.3% 1.2% 1.8% 2.5% 4.0% 3.0% 2.5% 1.9% 1.8%Rice 0.2% 0.3% 0.0% 0.1% 0.1% 0.1% 0.0% 0.1% 0.4% 1.0% 2.2% 2.4% 3.8% 3.1% 3.4%Garment 94.8% 93.3% 95.3% 96.2% 95.8% 96.4% 96.3% 96.4% 88.4% 88.8% 86.4% 82.0% 77.1% 73.5% 73.7%

Export by Products

18

Source: Ministry of Economy and Finance, 2016

Export Market Diversification: From export to the US to export to EU, Japan,...

3.2% 5.4% 3.6% 2.6% 3.0% 2.9% 3.0% 3.2% 7.8% 4.5% 6.2% 7.2% 9.3% 11.7% 11.1%

25.6% 24.6% 24.5% 28.2%21.5% 21.5% 21.7% 22.4%

23.8%25.0%

30.0% 32.1%33.4%

34.1% 37.9%

66.5% 65.2% 64.5% 60.8%66.1% 66.1% 64.3% 61.8% 52.5% 52.3% 42.6% 36.7% 31.4% 26.7% 23.9%

0.8% 1.1% 1.1% 1.1% 1.1% 1.1% 1.0% 0.9% 2.6% 2.4%3.1% 3.5% 4.8% 5.7% 6.8%

4.0% 3.6% 6.3% 7.4% 8.3% 8.4% 10.1% 11.8% 13.2% 15.7% 18.1% 20.5% 21.1% 21.8% 20.2%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Share of Export Value by Countries

ASEAN EU USA JAPAN Others

19

3. Fiscal Performance

20

The recent success in revenues mobilization has been attributed to strengthening of tax and non-tax administration, increasing taxpayers’ compliance and robust economic growth…

Source: Ministry of Economy and Finance, 2016

1993 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015e 2016BL 2017p 2018p 2019p

Domestic Revenue (Left Axis) 290 1,423 1,564 1,786 1,821 2,220 2,719 3,394 4,223 5,567 5,137 6,182 6,693 8,594 9,300 11,549 13,190 14,359 16,232 18,302 20,619Expenditure (Left Axis) 608 2,040 2,558 3,013 2,995 3,043 3,389 4,203 5,151 6,681 8,938 10,176 10,943 12,406 13,476 14,598 15,328 18,284 20,546 22,787 25,143Domestic Revenue % of GDP 4.3% 10.1% 10.0% 10.6% 9.8% 10.4% 10.6% 11.4% 12.1% 13.3% 11.9% 13.1% 12.9% 15.2% 15.2% 17.0% 18.0% 17.9% 18.2% 18.5% 19.0%Expenditure as % of GDP 8.9% 14.5% 16.4% 18.0% 16.2% 14.2% 13.2% 14.1% 14.7% 15.9% 20.8% 21.6% 21.0% 21.9% 22.0% 21.6% 20.9% 22.8% 23.1% 23.1% 23.2%Overall Deficit as % of GDP -4.7% -4.3% -6.0% -7.2% -5.4% -3.8% -2.7% -3.3% -2.8% -2.9% -8.8% -8.5% -8.2% -6.7% -6.8% -4.5% -2.9% -4.9% -4.8% -4.5% -4.2%

290

14,359

608

18,284

4.3%

17.9%

8.9%

22.8%

-4.7%-4.9%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

-

5,000

10,000

15,000

20,000

25,000

30,000

Bill

ion

Rie

ls

21

22

Tax revenue (% of GDP)

2013 2014 2015Bangladesh 8.5 8.1 8.0Indonesia 12.5 12.1 11.9Lao 15.0 15.5 15.0Malaysia N/A N/A N/APhilippines 14.5 14.8 14.8Thailand 18.7 17.2 17.8China 18.7 18.6 18.3Sri Lanka N/A N/A N/AVietnam 19.1 18.2 17.9Singapore 13.5 14.0 13.9India 16.8 16.7 17.4

Source: World Economic Outlook Database, 2016

Revenue as a Share of GDP of Cambodia’s ASEAN Peers

Source: Ministry of Economy and Finance, 2016

Less reliance on international trade tax while expanding domestic base…..

59% 57% 63% 64% 66% 66% 65% 69% 69% 71% 72% 74% 72%

23% 21%21% 21% 20% 19% 18% 17% 15% 15% 15% 14% 15%

0%

10%

20%30%

40%

50%

60%

70%

80%

90%100%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016BL

Share of Current Revenue

Domestic Tax International Trade Tax

23

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016BL

2.0%

1.7% 1.8% 1.8%

1.4%

1.3% 1.4% 1.

6% 1.8% 1.8%

1.6%

2.3%

2.0%

1.8% 1.

9%

1.9% 2.0%

3.2%

2.7%

2.4%

2.2%

2.0%

1.8%

1.7% 1.

8% 2.1%

3.5%

2.8%

2.7% 2.8% 2.

9% 3.1% 3.2% 3.

4%

2.6% 2.

9%

3.5%

3.3%

3.1%

2.8% 2.

9%

3.0% 3.

2%

3.8%

3.8%

3.8% 4.

0% 4.3% 4.3% 4.

6%

5.3%

0.8% 1.

0%

1.0%

0.9%

0.7%

0.7% 0.7%

0.7% 1.

0%

0.8% 0.

9%

0.8% 0.8% 0.9% 1.

2% 1.4% 1.4%

General Administration Defense and Security Social affairs Economic sector

Source: Ministry of Economy and Finance, 2016

More attention towards social affairs…

24

Cambodia’s debt distress rating remains low….

Source: Ministry of Economy and Finance, 2016

2,612 2,880 3,1573,650

4,2814,877 5,284 5,651

6,2987,011

7,7678,567

25.3%

27.7% 27.1%28.2%

30.5%32.0% 31.5% 31.3% 31.7% 31.9% 32.3% 32.4%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

0.00

1,000.00

2,000.00

3,000.00

4,000.00

5,000.00

6,000.00

7,000.00

8,000.00

9,000.00

2008 2009 2010 2011 2012 2013 2014 2015 2016e 2017p 2018p 2019p

Mill

ion

USD

Debt Stock (Million USD) Debt-to-GDP Ratio

25

4. Financial Sector Performance

26

Source: National Bank of Cambodia, 2016

Despite the moderation in credit growth, the loan-deposit ratio of the financial system still remains high, requiring effective monitoring and supervision of financial institutions…

28.6

%

25.6

%

34.4

%

41.1

%

46.9

%

56.4

%

61.4

%

76.5

%

83.5

%

77.9

%

84.8

%

19.8

%

26.1

%

27.4

%

31.8

%

38.9

%

48.2

%

57.2

%

69.8

%

83.2

%

73.3

%

81.7

%

69.4

%

102.

2%

79.5

%

77.4

%

83.0

%

85.4

%

93.2

%

91.2

%

99.7

%

94.1

%

96.3

%

74.6%

7.1%

38.2%

30.3%

26.5%

30.9%

17.8%

36.9%

18.8%

28.0%

19.2%

81.6%

57.7%

7.5%

26.8%

35.6%34.7%

28.6%

34.1%

29.9% 35.8%

22.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

2007 2008 2009 2010 2011 2012 2013 2014 2015 Jun-15 Jun-16Deposit to GDP Ratio Credit to GDP Ratio Loan to Deposit Ratio Total Deposit Growth Total Credit Growth

Total Credit and Deposit in Financial Sector

27

Source: National Bank of Cambodia, 2016

Financial sector continues expanding….

28

41 845

1,56

0 2,41

9

2,54

1 3,16

7

4,33

7

5,89

0

7,41

4

9,61

5

12,0

32

36 1,39

3

2,46

2

2,63

5

3,56

6 4,58

9 5,88

0 7,65

1 8,91

8

11,8

57 13,7

83

20

24

3133

35 35

39

44 4647

0

5

10

15

20

25

30

35

40

45

50

0

2000

4000

6000

8000

10000

12000

14000

16000

1993 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Mill

ion

USD

Bank Credit Bank Deposit Number of Banks

87 152

278

300 41

3

636 87

7 1,30

7

2,03

5

3,01

5

3 5 5 10 40 114

275

442

912

1,30

5

16 17 1820

25

30

35 3639

53

0

10

20

30

40

50

60

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015M

illio

n U

SD

MFI Credit MFI Deposit Number of MFIs

Robust and inclusive

growth with macroeconomic

stability

Asia’s tiger and lower middle

income economy

Diversification of export

products and markets

Impressive poverty

reduction and shared

prosperity

Self-dependence and

self-determination

Major Achievements over 25 Years

29

5. Global and Domestic Challenges

30

Global Risks Global Opportunities

1. Brexit: causing uncertainty in global recovery Regional integration policies in concert with open and favorable policies for investment in all sectors

2. Weak key fundamental strength (growth rate, inflation, unemployment…)

Strategic location for connecting with ASEAN and Greater Mekong Sub-region in developing infrastructure and strengthening production clusters for regional and international markets

3. Direction of monetary policy Factory relocation from China

4. New forms of trade barriers China’s transitioning from domestic investment led economy to consumption-led economy

5. New international agreements, such as TPP, etc. Growing middle class, especially in China

31

Major Domestic Challenges Major Domestic Opportunities

Sustaining high economic growth and inclusiveness Fast growing middle class

Slow structural reforms and economicdiversification, and weak competitiveness

Regional integration policies in concert with openand favorable policies for investment in all sectors

Rapid expansion of financial sector

Strategic location for connecting with ASEAN andGreater Mekong Sub-region in developinginfrastructure and strengthening production clustersfor regional and international markets

Slow growth of labor productivity/TFP Demographic dividend

Climate change

Fiscal sustainability and fiscal space

Low complete rate of secondary education and lack of skills

Logistics and transportation system32

6. Ways forward

33

Ways forward for upper middle income economy by 2030 and high income economy by 2050

Continue implementing macro-prudential policy

Strengthening economic competitiveness and diversification

- Skill development

- Improving logistic and transport system

- Trade facilitation

- Reducing cost of doing businesses

- Effective and timely implementation of IDP 2015 - 2025

Strengthening education system and research and development

Reviving agriculture: New agriculture strategy?34

Financial resource management • Improve tax system• Fiscal sustainability and fiscal space• Building budget linkage to policy and accountability• Ensuring efficiency at both levels

• allocative • operational

• Strengthening financial stability and resiliency• Development of capital market

Development and promotion of Public Private Partnership Promoting social inclusion and protectionUrbanization and city planning Environmental protection:

• Climate resilience• Climate change adaptation

Strengthening governance, institution and public sector reforms: civil service, judiciary, etc….35

Ways forward for upper middle income economy by 2030 and high income economy by 2050

Congratulations !!!

36