Download Workshop on Macroeconomic Modeling in Asia and the Pacific

Workshop on Macroeconomic Modeling in Asia and the Pacific
8-11 December 2015
Bangkok, United Nations Conference Centre (UNCC)
National Macroeconomic Forecasting Model the
Case of Cambodia
Cambodian Team:
1-Mr. Cheng Savuth (MEF,GDNT)
2-Mr. Senh Senghor (MEF, GDT)
3-Mr. Kim Vera (MOEYS)
Disclaim: This presentation represents the view of the authors and does not represent the views
of the ministry of economy and finance or any departments. The views expressed herein should
be attributed to the authors and not to the MEF or its management.
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Photo: Linna Ky / World Bank
Phnom Penh, Cambodia
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Why do we need macroeconomic
modeling?
 To
support policy makers with
difference scenarios to consider
 To support national budget
preparation (revenue and
expenditure)
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Why do we need macroeconomic modeling?
Rectangle Strategy
(Government’s Plan) 5 years
Macroeconomic Condition
(Past, Current and Future)
Yearly GDP Growth Rate, Inflation
Public Forum
Cambodia’s Annual
Budget Law (Planned Expenditure/Revenue)
Execution of Budget (Expenditure/Reveneue)
Source: Author’s compilation based on relevant documents
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Who is the main organization responsible for
macroeconomic forecasting?
Secretariat General Department
General Department of Economic and Public Finance Policy (GDEPFP)
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Department of Macroeconomic Policy and Fiscal
Department of Statistics
Department of Economic Integration and ASEAN
General Department of Budget
General Department of Sub-National Administration Finance
General Department of Public Procurement
General Department of Customs and Excise (GDCE)
General Department of Taxation (GDT)
General Department of State Property and Non-Tax Revenue:
General Department of National Treasury (GDNT)
General Department of Financial Industry
General Inspectorate Department
General Department of Internal Audit
Source: http://www.mef.gov.kh/mef-line-departments.html
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Forecasting GDP (Old Technique)
 Production
Function
Production approach in
agriculture sector
 Linear-Stages Theory in Other
Sectors (Harrod-Domar Growth
Model)
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Source: public workshop presentation by senior officer of MEF, GDEPFP
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Linear-Stages Theory
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Production function
Q = ƒ(K, L, A)
Where Q: real output, K: capital, L: labor, A: technology
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Exceptional function in Cambodia
g = s/k
Where
g: the growth rate of GDP
s: the saving ratio (s = S/Y or s = I/Y)
k: the ICOR (incremental capital-output ratio) that measure the efficiency of investment (k
= I/∆Y) - inefficient when ICOR become bigger and bigger
Y: income (GDP)
I: Investment that is financed by saving.
Source: public workshop presentation by senior officer of MEF, GDEPFP
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The ICOR
Source: public workshop presentation by senior officer of MEF, GDEPFP
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Fiscal Policy
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The main objectives:
 Achieve macroeconomic stability
 Facilitate economic growth with low inflation (single
digit)
 Support government policies set forth in the official
documents- CMDG, NSDP etc.
The adequate measures undertaken:
 Budget implementation with extreme prudence and
caution (Budget discipline)
 Improvement in revenue collection
 Selective spending policies (Sector priority)
Source: public workshop presentation by senior officer of MEF, GDEPFP
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Fiscal performance has improved thanks to strong
revenue collection and prudent spending
Revenue collection has increased substantially
in recent years driven by economic buoyancy
and improvement in tax administration.
Spending has been broadly in line with the
budget, and as a result, the fiscal position and
government deposits have continued to improve.
Source: public workshop presentation by senior officer of MEF, GDEPFP
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Recent in Revenue Policy Reforms
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Targeting 0.5% of GDP yearly increase in the
medium term
- Broadening the taxable base and reducing the
tax rate
- Simplification of the tax structure
- Ensuring the productivity and buoyancy of
taxes
- Recognition of the need to harmonize tax
regimes among neighboring tax jurisdictions
Source: public workshop presentation by senior officer of MEF, GDEPFP
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Forecasting of GDP (New Technique)
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Summary (short-term forecast):
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Past data of main economic indictors (Different Sources)
Past data of output of each economic sector (National Account)
Applies the forecasting techniques to each sector using main
indicators to estimate (forecasted) growth rate of each sectors
The forecasted growth rate of each sector is used to forecast output
by each sectors.
Aggregate all the forecasted sectoral output to get GDP (nominal)
and real GDP (by adjusting with relevant deflator)
Calculated the forecast growth rate of GDP
Forecasted growth rate of GDP is used for fiscal forecasting and
others
Source: author’s compilation from interview and relevant documents
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Some of the main indicators
Garment exports
Number of tourists
Credit to the private sector divided by the CPI
Merchandise Imports divided by GDP
Import of construction material + construction equipments +
cement and steel; divided by the CPI
Electricity energy consumption
Government revenue divided by the CPI
Others indicators
Source: author’s compilation from interview and relevant documents
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Forecasting Technique
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The real growth of each sector is assumed to
depends on the growth rate of the indicators:
Growth rate by sectors
Main indicators
y=f(x)
Source: author’s view
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Data Sources
MEF department of statistics
 National Institute of Statistics
 National Bank of Cambodia
 Other local and international sources
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Source: author’s compilation from interview and relevant documents
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Application of Forecasting Model
The forecasted GDP growth rate and inflation
has been used in designing annual budget law.
 It is used to help in fiscal projection such as
expenditure and revenue
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Source: author’s compilation from interview and relevant documents
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Conclusions of the team
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Macroeconomic forecasting model is very useful in providing
alternative future projection for assisting policy makers to
choose.
The role of forecasting is being widely accepted in
government institutions, for example at GDT and GDCE, we
have revenue forecasting. At GDNT, we have cash
forecasting and debt management, budget execution
forecasting (quarterly, semi-annually, annually).
The capacity-building for forecasters on knowledge such as
forecasting technique is needed for Cambodia.
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Conclusions of the team
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Every forecasting technique should be checked for fitness, validity
and its assumptions. This helps to update the techniques. Moreover,
quality of data do need improvement in the context of Cambodia.
International Community, especially, ESCAP can help Cambodia
 By promote capacity building for forecasters
 Providing support for setting of system or software for
forecasting
 Allow networking of forecasters (local and international) to
share experience on the way forecasting technique is being
used.
It can validate or modify the currently used technique
It can construct technique that allow crosscountries/regional comparison
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(Angkor Wat Arial View)
Thank you very much for your listening.
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