WAKING UP FROM THE DARK SPELL

All over the world, revival from the long spell of economic slump had begun by the second half of 2009. East Asia was at the forefront of global recovery, with some of the hard–hit industrialized countries finally managing positive quarterly output growth and the Chinese economy regaining its pre–crisis robustness. The road to recovery certainly did not come easily. Countries recognized that go-it-alone strategies would have been ineffective in battling the recession given its nature. Thus, they needed to synchronize remedial action as far as possible. Countries were also confronted with serious policy dilemmas. Aggressive policy interventions came with a high price that needed to be settled afterwards. This settlement would be painful but failure to stem the tide of the crisis with Keynesian–type strategies would have depressed economies further. Everywhere, it was recognized that while economic rebound rested on quick fixes, a more sustainable recovery depended on re-orientation of development strategies and structural reforms. Economic risks remain aplenty, heightening the pressure to act on such imperative decisively.

Cambodia started to emerge from the crisis along with the rest of the world. The global upturn served as a beneficial push factor that stimulated trade and capital inflows, while government actions served as a pull factor that helped rein in investor flight and keep the growth sectors afloat. Recovery for the country was also a struggle, not least because its crisis response was undermined by the fact that it is one of the poorest nations in the world. Some quick fixes facilitated economic rebound but there was also the recognition that deeper reforms were needed to ensure a recovery that could better address existing and imminent risks, better exploit growth opportunities and better withstand another crisis that might not be far away. Such thrust rests on the thesis broached in Chapter 1 and is reflected in the discussions in the other chapters. The nature of Cambodia's post-conflict economic development shaped the impact of the global crisis.