Cambodia Lowers Economic Growth Forecast Amid Tariff Policy Impacts

• 22 May 2025
• Local News
• 2773 Views

The Government of Cambodia has revised its economic growth projections for 2025 and 2026, anticipating a decline to approximately 5%. This adjustment comes in light of the anticipated repercussions of a recent tariff policy primarily affecting the export-oriented service sector.

Prior to the announcement of these tariffs by the United States, Cambodia’s economy showed promising momentum, with growth estimates around 6.3% for 2025-2026 and an optimistic 6.5 percent projected for the medium term (2027-2028). However, according to the recently released Budget Strategy Plan 2026-2028 and the Finance Management Bill for 2026, the new forecast points to a growth rate of just 5.2% in 2025 and 5% in 2026.

The decline is largely attributed to the adverse effects of reciprocal tariffs on the garment and non-garment industries, which are crucial to Cambodia’s export economy. The impacts are expected to extend to other vital sectors such as transportation, inventory, and wholesale-retail, further straining the nation’s economic landscape.

Concerns are mounting that if the external economic situation worsens, and negotiations between Cambodia and the United States do not yield positive results, the growth forecast may need to be revised downward yet again.

In response to these challenges, the Cambodian government is committed to accelerating measures aimed at enhancing competitiveness, increasing economic diversification, and fortifying socio-economic resilience. Key initiatives include advancing the “Pentagon Strategy – Phase 1” and the “Program to Promote Competitiveness, Increase Diversification and Strengthen Resilience to Promote Economic Growth in a Global Environment of High Uncertainty (2025-2028),” which are seen as critical drivers for sustainable economic growth in the medium and long terms.

At the same time, Experts from the ASEAN+3 Macroeconomic Research Office (AMRO) have offered a more cautious forecast, predicting a slowdown in Cambodia’s growth to 4.9% in 2025 and 4.7% in 2026. They emphasised the need to address multiple emerging challenges to navigate the current economic climate successfully. (Read more)

Compounding these national concerns, the International Monetary Fund (IMF) has also adjusted its global growth outlook, projecting increases of only 2.8% in 2025 and 3.0% in 2026. This revision reflects the broader implications of rising protectionist policies, resulting from extensive tariff increases and reciprocal agreements.

As Cambodia faces these economic hurdles, the government’s proactive approach in fostering resilience and adaptability will be essential in navigating the uncertainties of the global market landscape.

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