Two broad challenges beset Cambodia 2025. One, the downturn in the real estate sector could dent the overall growth; two, this is more worrying as the Donald Trump administration takes office next month could open floodgates to inevitable trade tensions and create a cat among the pigeons situation. In hindsight, however, the Royal Government is geared to take on the global headwinds. Cambodia’s economy is set to continue its upward trajectory with a growth rate of around 6.3 percent. With strong economic fundamentals intact, the Kingdom also needs to shed, what one keen observer told Khmer Times, its excessive bureaucracy and administrative challenges for international companies to grow their businesses.

Several indicators point to a strong economic performance by Cambodia in 2024 and the business sector or rather the private sector which has contributed the most to the Kingdom’s growth story in the past several decades strongly believes that this saga is all set to continue into the New Year braving global headwinds.

Despite a downturn in the construction and real estate sector in 2024, the Royal Government recently projected the country’s economic growth to be around six percent in the current year, up from five percent in 2023, boosted by a recovery in the garment sector, a rise in non-garment manufacturing and a gradual recovery in the tourism industry.

“Cambodia’s economy is set to continue its upward trajectory,” Aun Pornmoniroth, Deputy Prime Minister and the Minister of Economy and Finance, declared in the National Assembly during a 2025 budget law debate in late November.

“For 2025, Cambodia’s economy is forecast to achieve a growth rate of around 6.3 percent, which will push up the Kingdom’s gross domestic product (GDP) to $51.39 billion,” he said.

The Deputy Prime Minister said the country’s GDP per capita was estimated to reach $2,924 in 2025. According to him, in 2025, the industrial sector, mainly garment and construction, is predicted to grow by 8.6 percent, the service sector, mainly tourism, transport, telecom, trade and real estate, is expected to increase by 5.6 percent, and agriculture by 1.1 percent.

Accommodation and other supporting sectors (tourism) are expected to continue an upward trend and move toward the pre-pandemic level, he said, meanwhile, resilient momentum in the non-garment sector will continue with newly emerging production industries, especially automotive assembly, food, and beverage productions.

The country’s inflation is forecast to be a reasonable 2.5 percent in 2025, a continuation of the trend in 2024.

Meanwhile, the World Bank recently forecast Cambodia’s economic growth at 5.3 percent in 2024, up from five percent in 2023, buoyed mainly by trade, tourism, and foreign direct investment.

The World Bank’s report said real estate and property investment remained subdued in 2024. “The downturn in the property sector continued reflecting overcapacity in the property market and a continued housing market correction,” the report said.

According to the report, during the first eight months of 2024, the approved property development project value reached $3.3 billion, marking a 29.1 percent year-on-year decline, driven by a decline in investment in residential property.

Even though domestic demand is expected to further improve in the next two years, supported by an improved job market and well-anchored inflation expectations, the recovery remains incomplete, the report said.

This is because a rebound in domestic consumption, which accounts for about two-thirds of GDP, will be dampened by subdued domestic credit growth caused by a prolonged downturn in the construction and real estate sector, it added.

In addition, the negative wealth effects of falling house prices and notably high household debt, with debt service payments close to 50 percent of income, are likely to constrain consumption.

Cambodia can further boost its growth by diversifying trade and improving productivity, said World Bank Country Manager for Cambodia, Tania Meyer.

“Investing in human capital, in particular education, and deepening reforms to improve the business environment will be key to enable the private sector to create more and better jobs,” she said.

Cambodia has traditionally relied on a few key sectors, and reducing this dependence is crucial for creating a more resilient and diversified economic foundation. By expanding into new sectors and modernizing existing ones, Cambodia can ensure that growth is more balanced and sustainable.

More reforms urged
The World Bank’s report calls for comprehensive reforms in both the financial sector and infrastructure, as well as a focus on modernization and inclusivity. By addressing these areas, Cambodia can continue to build a strong, sustainable and competitive economy for the future.

Infrastructure development plays a key role in supporting this transformation. Investing in infrastructure is not only necessary for boosting economic activity but also for enabling modernization and digitalization.

These advancements can further enhance Cambodia’s global competitiveness, positioning the country as a leader in regional economic growth.

However, Tassilo Brinzer, Chairman of European Chamber of Commerce (EuroCham) in Cambodia told Khmer Times that the reforms and initiatives launched by the new administration headed by Prime Minister Hun Manet from 2023 will firm up in the coming year.

“The government has been open to discussion and feedback and is keen on moving forward fast while trying to attract business from all parts of the world. The most pressing issue is market access for new and existing businesses, as excessive bureaucracy and administrative challenges combined with overlapping regulation making it hard for international, compliant companies to grow their business,” Brinzer pointed out.

In his view, the most relevant areas of growth and opportunity are the logistics and transport, and renewable energy sectors. “While automotive industries and supply chains seem to be growing, there is only so much the market can absorb, while exports via Cambodia will be closely monitored by importing regions (see the solar panel export issues during 2023-2024).

According to Brinzer, the garment sector has been doing well in 2024 and can grow further but might find political obstacles ahead in the coming year, particularly in Europe where the European Parliament has launched a motion to review the EBA (Everything but Arms).

“Tourism seems to grow back although we are still not on the levels of revenues the industry created in earlier days. Lower budgets and new priorities will most likely see a reduced international development aid sector, which will result in less rental incomes, school enlisting, and local revenues and salaries,” Brinzer said even as he made a call to reduce red tape in bureaucracy and closer cooperation between ministries, government agencies and the private sector.

According to Anthony Galliano, Group CEO of Cambodian Investment Management Group, most institutions predict continued growth for Cambodia in 2025 varyingly from 5.5 percent to 6.3 percent, following a 2024 projected growth on average of approximately 5.8 percent.

“The engines of the economy have been exports, reaching $21.57 billion, marking a 16 percent increase compared to the same period in 2023, besides FDIs. While there is a reported increase in international tourism arrivals so far in 2024 of about 23 percent, this does not appear to be experienced by those in the sector, particularly in Siem Reap,” Anthony said.

“The global economy grew three percent in 2024, consistent with the previous year, despite geopolitical tensions, high public debts and persistent inflation. Growth is anticipated to remain at three percent in 2025 too, the main challenges anticipated to be inflation, trade policies, and political uncertainties,” he noted.

According to Anthony, in the last month the Dow Jones Industrials in the US, the bell weather index for financial markets globally, has fallen four percent. Delays in interest rate cuts and mixed economic data are part of the reason, while ongoing tensions and uncertainties surrounding trade policies, particularly between major economies, have added to market volatility, prompting investors to adopt a more cautious approach.

“I expect a paradigm shift in global economic and trade, commencing in 2025, as the Donald Trump administration is to take office. Tariffs are anticipated on major trading partners, particularly China. This will likely result in continued higher inflation, acceleration of shifts in the supply chain, trade tensions, and financial market volatility. There will also be a period of disruptive policies with the largest economy in the world seeking to reverse unfavourable trade arrangements. For Cambodia, this may impact the exports that have underpinned the economy in recent years,” Anthony pointed out.

Real estate sector
Tom O’Sullivan, Chief Executive Officer of realestate.com.kh, told Khmer Times that 2025 in all likelihood will be a good year for real estate buyers. “A significant surge in resale properties is expected throughout 2025, likely marking the true market bottom we’ve anticipated over the past 24 months, which represents a good opportunity for buyers,” he said.

“I suspect that landed property prices will continue to decline before stabilizing later in the year. The condo market is likely to grow steadily, with limited new launches. Developers focus on central locations and prioritize projects in the affordable to mid-range sector. There will be continued value for buyers in this sector,” Tom noted.

According to him, in Phnom Penh, BKK1 rents will be interesting to observe with over 1,000 new units entering the market following the completion of Le Conde and Time Square 306.

“The Koh Pich/ Norea City area will continue to develop, providing value to people moving into Diamond Bay Garden after units are gradually handed over later in 2025.

There will also be continued green shoots of growth in Sihanoukville. The government has already resolved over 100 unfinished building cases and continues accelerating,” he added.

Key sectors
According to Tan Khee Meng, President of the Malaysian Business Chamber of Cambodia (MBCC), it is evident that Cambodia’s core economic fundamentals, namely tourism, agriculture, construction, and manufacturing, have shown signs of recovery in 2024 since the challenges faced during the COVID-19 pandemic.

“Under the leadership of Prime Minister Hun Manet, who took office in 2023, notable reforms have taken place. The forward-looking strategies and policies have created tremendous positive effects, and it is anticipated that industrialization, agro-processing, ICT, and renewable energy will receive significant foreign direct investment (FDI) in 2025 and beyond,” Meng said in an optimistic note.

In his view, Cambodia’s strategic location and open FDI policies make it an ideal destination for factories and manufacturers seeking to relocate from China to Southeast Asia.

“The ongoing geopolitical tensions between the US and China have led to a shift in global supply chains, presenting opportunities for countries like Cambodia to attract more FDI. In 2024, Cambodia’s total FDI inflows increased compared to the previous year. This growth is expected to continue in 2025,” he said.

According to Meng, the Regional Comprehensive Economic Partnership (RCEP) has provided Cambodia with access to a market of 2.2 billion people, representing about 30 percent of the world’s population. This presents immense potential for Cambodian businesses to expand their reach.

The MBCC President said that the private sector in Cambodia remains confident in the country’s continued economic development in 2025 and beyond. “With the right policies and investments in place, Cambodia is poised to become a more prominent player in the region, leveraging its strategic location, young population, and growing economy to attract more FDI and foster sustainable growth,” he said.

Socio-economic researcher Chey Tech said that Cambodia is expected to push the country’s GDP to about $51.5 billion, which is almost $2,500 per capita income. “The macroeconomic growth in 2025 mainly relies on key sectors such as industry, services, and agriculture,” he noted while acknowledging challenges such as geopolitical tensions, trade wars and supply chain disruptions.

Thong Mengdavid, Geopolitical Analyst and Lecturer at the Institute for International Studies and Public Policy (IISPP) at the Royal University of Phnom Penh (RUPP), is confident that Cambodia’s economy will maintain its positive momentum in 2025, fuelled by its dynamic young workforce, a growing manufacturing sector, and deeper integration into regional trade frameworks like ASEAN.

“A key priority will be diversifying the economy, with a focus on technology, green energy, and digital innovation to lessen dependence on traditional industries such as garment exports. Major infrastructure projects like the Funan Techo Canal are expected to boost connectivity and attract further investments,” Mengdavid noted.

“Moreover, advancing education and skill development will be critical for Cambodia to harness its demographic strengths and achieve sustainable, long-term growth toward its high-income goals,” he said.

Vichet Lor, Vice President of the Cambodia Chinese Commerce Association (CCCA), said that the Royal Government’s open trade policy, continuing reforms of its tax regime along with the frequent interactions with the private sector have helped to address key issues and challenges in a timely manner and boosted international trade to new heights.

“The aspiration of Cambodia to elevate itself on the regional supply and value chains has been demonstrated by its huge investment to upgrade its public infrastructure like airports, seaports and expressways to enhance competitiveness on the logistics front and regional connectivity,” Vichet noted.

He, however, added that as Cambodia has embarked on a journey to becoming a high-income country by 2050, imminent challenges remain like accelerating governance and judicial reforms to ensure an open, fair and transparent investment climate.

This article is firstly published on Khmer Times

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