PHNOM PENH, April 12 (Xinhua) -- Cambodia's economy is projected to grow by 6.9 percent this year, a 0.1 percentage point higher than that of last year, said the World Bank outlook report on Thursday.

"Growth in 2018 is expected to be underpinned by rising government spending and favorable global conditions, including robust demand in advanced economies," World Bank senior economist to Cambodia Miguel Sanchez said in a press conference here during the launch of the annual outlook report.

According to the report, in the medium term, large foreign direct investment (FDI) flows and public investment in infrastructure were expected to help promote output by boosting aggregate demand and expanding the productive capacity of the economy.

"Downside risks to the outlook include threats associated with a prolonged construction boom, potential uncertainty related to the July 2018 general elections, and declining external competitiveness," it said.

The report said the ongoing construction and real estate boom needed close monitoring, as credit growth directed to the construction and real estate sector had accelerated in recent years. It is therefore necessary to reduce the scope for speculative activities.

"In addition, employment growth prospects look less certain. As real wages rapidly increase, Cambodia's external competitiveness, which primarily relies on cheap labor, is being eroded," it added.

According to the report, inflation was expected to moderate to 3.2 percent in 2018, down from 3.4 percent in 2017.

The Southeast Asian nation's economy is traditionally driven by garment exports, tourism, construction and real estate, and agriculture.

China is both the largest sources of foreign direct investment (FDI) and tourists to Cambodia. In 2017, Cambodia attracted the fixed asset investment of 1.43 billion U.S. dollars from China, or 27 percent of the total investment in the country last year.