Cambodia Should Navigate Rising Global Uncertainty with a Multifaceted and Coordinated Policy Strategy

• 12 May 2025
• Local News
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Cambodia’s economic growth accelerated to 6.0 percent in 2024 from 5.0 percent in 2023, driven by a strong rebound in the garment sector. However, in light of unexpectedly high US tariffs, growth is expected to decelerate to 4.9 percent in 2025, due to its heavy reliance on exports to the US. A coordinated and multifaceted policy, including targeted fiscal support and diversification of markets and industries, is needed to strengthen resilience amid escalating global trade tensions. Once external risks ease, attention should shift toward restoring fiscal space, mitigating financial risks, and advancing structural reforms to further diversify the economy.

These findings are based on the preliminary assessment by the ASEAN+3 Macroeconomic Research Office (AMRO) following its Annual Consultation Visit to Cambodia from April 21 to 30, 2025.

The mission was led by AMRO Principal Economist Jinho Choi. Policy discussions involved AMRO Director Kouqing Li and Chief Economist Hoe Ee Khor, and focused on Cambodia’s recent macroeconomic developments, outlook, risks and vulnerabilities, and policy recommendations to secure resilient growth and financial stability.

Economic developments and outlook

“Due to the sharp rise in tariffs on its goods export to the US, Cambodia’s economic growth is expected to decelerate to 4.9 percent in 2025 and 4.7 percent in 2026,” said Dr. Choi. “However, the economy is resilient, and the government should take targeted measures to support the economy, especially the affected sectors.”

Inflation in 2024 was highly volatile, driven primarily by food prices. While consumer price index (CPI) inflation fell sharply in 2024, averaging 0.8 percent, it spiked in the first two months of 2025. Inflation is forecast at 2.7 percent in 2025, before moderating to 2.2 percent in 2026, returning to pre-pandemic levels.

The current account surplus narrowed to 0.5 percent of GDP in 2024, reflecting a wider trade deficit. It is projected to shift into a deficit of 3.6 percent of GDP in 2025 and 5.5 percent in 2026. FDI inflows are expected to decline slightly in 2025 amid investor caution, before recovering in 2026.

The real estate sector remained weak in 2024, as it is in the early phase of recovery. Meanwhile, credit growth remained low at around 3 percent in 2024, despite ample liquidity supported by strong deposit growth.

On the fiscal front, revenue collection in 2024 fell significantly short of the budget due to sluggish tax collection. In response, the government cut spending, which narrowed the fiscal deficit to 2.1 percent of GDP in 2024 from 3.9 percent in 2023. For information, please visit here

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