Cambodia's economic growth is expected to slow in 2025, according to the World Bank's latest Cambodia Economic Update. The report projects a 4.8 percent growth rate for the year, down from 6 percent in 2024. The slowdown is attributed to a weaker property sector, disruptions at borders, and new trade restrictions.
The World Bank notes that these challenges have reduced domestic demand and affected construction activity. Border tensions have also impacted labor markets and tourism. Despite these pressures, Cambodia maintains strong macroeconomic buffers, including international reserves sufficient to cover about 7.5 months of imports and a public debt level of approximately 26 percent of GDP. Inflation has remained contained at an average of 2.7 percent in 2025.
Foreign direct investment inflows rose by 28.4 percent year-on-year in the first half of 2025, reaching $2.3 billion, which has helped offset some external imbalances. However, government revenue is expected to remain subdued due to weaker consumption, and the current account deficit is projected to widen.
Tania Meyer, World Bank Country Manager for Cambodia, said: “Cambodia is navigating a challenging period amid combined domestic and external shocks. Strong buffers and targeted reforms can help the country withstand these economic pressures. Protecting vulnerable households, including returnees, remains essential. At the same time, improving the business environment, supporting informal enterprises and easing formalization are critical to unlock growth, level the playing field, and create better-quality jobs.”
To address current challenges, the report suggests immediate measures such as emergency cash transfers and training programs for returned migrants to support vulnerable households and stimulate domestic demand. For the medium term, it recommends reducing business costs, enhancing access to finance for small enterprises, and digitizing trade and logistics processes.
A special chapter in the report examines Cambodia’s informal economy—which represents about 90 percent of all businesses and provides employment for roughly 88 percent of workers—highlighting its significance in maintaining household incomes during periods of economic stress.
The analysis reveals that informal firms are on average less productive than formal ones but notes significant diversity within this sector—from basic survival businesses supporting vulnerable families to high-performing informal enterprises competing with formal firms.
Recommendations include expanding social protection for owners of survival enterprises; helping viable informal businesses grow; boosting productivity; and encouraging highly productive informal businesses to formalize through lower registration costs, expanded digital services, and clear incentives.
The Cambodia Economic Update is published twice yearly by the World Bank.