Cambodia's economy has demonstrated resilience amid global uncertainty, with strong exports and a partial revival in private consumption contributing to this stability. However, sustaining growth will require diversification of the economy and fostering an environment conducive to private sector investment and job creation.
The World Bank’s latest report, Cambodia Country Economic Update: Navigating Uncertainty, projects that economic growth will slow to 4.0% in 2025 and 4.5% in 2026. The report highlights challenges such as global uncertainty, shifts in trade policies, a prolonged downturn in the property sector, and a tightening credit cycle.
"Economic diversification is critical for Cambodia to sustain growth and job creation amid uncertainty," said Tania Meyer, World Bank Country Manager for Cambodia. "Revenue reforms can support a better business environment while generating fiscal space for critical investments in human capital and infrastructure."
In the first quarter of the year, Cambodia's exports—particularly garments, travel goods, footwear, and bicycles—grew by 11.6% year-on-year. International arrivals increased by 16.1%, although they remain below pre-pandemic levels from 2019. Private consumption also showed signs of recovery through increased imports of consumption goods like foodstuffs, garments, cars, and motorcycles.
Externally, rising remittances and tourism revenues helped offset a widening trade deficit, with reserves reaching US$24.7 billion. Broad money grew by 19.0% year-on-year due to favorable monetary conditions. Inflation rose slightly to 3.7%, primarily driven by food prices. Meanwhile, financial sector asset quality declined with higher nonperforming loan ratios.
The report's special focus section discusses how tax reforms can create a more growth-friendly business environment while providing fiscal space for essential investments in human capital and infrastructure—a key step towards achieving Cambodia’s goal of becoming a high-income country by 2050. It emphasizes three dimensions: mobilizing resources for development investments; enhancing the business climate with an efficient tax system; and promoting equity through fair tax distribution while addressing social and environmental issues.