Economic growth remains strong, drivenprimarily by robust expansion in consumption and exports.Domestic demand has been boosted by higher wage growth andlarger public investments, with fiscal expansion serving asstimulus. Public outlays were budgeted to increase to 24.6percent of GDP in 2018 from 23.1 percent in 2017. At thesame time, strong external demand has boosted exports ofgarment and footwear products, which increased 16.1 percent(y/y) during the first half of 2018 - a two year high—from8.3 percent at the end of 2017. Tourist arrivals reached 3million during the first six months of 2018, a 13.6 percentincrease (y/y), compared with 11.8 percent in 2017, drivenby a surge in tourist arrivals by air from China. Capitalinflows, mainly comprising foreign direct investment (FDI)continue to increase, underpinning Cambodia'sstable external position. Official data showed rising FDI tothe manufacturing sector, especially the textile, apparel,and footwear industries, and to agroprocessing. Vibrantconstruction activity continues to be financed by rising FDIinflows and domestic credit. FDI is estimated to haveincreased by 14.3 percent (y/y) during the first six monthsof 2018. About 90 percent of the inflows (excluding those tothe financial sector) have originated from China and aredirected toward the construction and real estate,agriculture and agroprocessing, and garment sectors. Agrowing proportion of FDI is now invested in the productivesectors, namely the manufacturing and agriculture sectors,albeit its share remains relatively small at about 20percent of total inflows.
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