Economic Situation

The Cambodian economy is at a critical pass. To the strains caused by the transition from central planning to a market economy, which the country shares with all economies in transition, the burden of the war has been added. Its current macroeconomic developments reflects the country emergence from almost two decades of armed conflict and isolation to the changing world economy. While most of the former centrally planned economies have had access to various forms of foreign assistance to smooth the impact of the reforms on output and living standards, Cambodia was cut off from foreign financial support and had to fend for itself. It has seen an inordinate proportion of its resources and income directed toward financing conflict. The Cambodian economy has until recently also labored under the constraints imposed by a centrally planned, command-and-control approach to economic management. Although in many respects the progress made during the past decade in recovering from the devastation of the 1970s has been impressive, in effect, a quarter of a century of progress has been lost.