Cambodia’s Economic Growth Set to Reach 5.5% in 2025 and 2026: A Promising Projection
Cambodia’s economy is poised for a gradual uptick, with the World Bank projecting the country’s Gross Domestic Product (GDP) to grow by 5.5% in both 2025 and 2026. This outlook, detailed in the World Bank’s latest report, Cambodia Economic Update: From Recovery to Resilience – Harnessing Tourism and Trade as Drivers of Growth, underscores the nation’s steady recovery while pointing out challenges that still linger.
A Recovery with Caveats
The World Bank highlights that domestic demand is anticipated to improve over the next two years, bolstered by a stronger job market and stable inflation. However, the road to full recovery remains incomplete.
A significant factor is the limited rebound in domestic consumption, which constitutes nearly two-thirds of Cambodia’s GDP. This is due to sluggish domestic credit growth, attributed to ongoing difficulties in the construction and real estate sectors. Additionally, falling house prices and high household debt—where debt servicing consumes close to 50% of household income—are likely to hinder consumer spending further.
Pathways to Growth
Tania Meyer, the World Bank Country Manager for Cambodia, emphasized the importance of enhancing trade diversification and productivity to sustain growth.
“Investing in human capital, particularly education, and deepening reforms to improve the business environment will be key to enabling the private sector to create more and better jobs,” she said.
Government’s Optimistic Projections
Contrasting the World Bank’s forecast, the Ministry of Economy and Finance projects a higher economic growth trajectory. Deputy Prime Minister and Minister of Economy and Finance Aun Pornmoniroth recently outlined a more ambitious target, predicting GDP growth of approximately 6% in 2024 and 6.3% in 2025.
This optimistic outlook is driven by the sustained momentum in export-oriented sectors, particularly the garment industry. Furthermore, the Deputy Prime Minister highlighted the recovery in tourism and hospitality, which are steadily returning to pre-pandemic levels. Emerging industries, including automotive assembly and food and beverage production, also show resilience and promise.
Inflation, another critical metric, is projected to stabilize at 2.7% in 2024 and 2.5% in 2025, though current trends suggest it could be even lower in 2024.
Building Investor Confidence
According to Sam Seun, a policy analyst at the Royal Academy of Cambodia, fostering trust among foreign investors is vital for sustaining economic growth. “While it is easy to talk about building trust, implementing measures to gain it is equally important,” he said.
Seun elaborated that factors like production costs, electricity costs, transportation efficiency, and competitive staff salaries significantly influence investment decisions.
“Investors aim to profit when they invest in a country. A convenient and favorable investment environment is essential. Increased investment translates into more job creation and greater economic profitability,” he noted.
Role of Agriculture in Economic Resilience
In addition to trade and industry, Seun highlighted the agricultural sector’s potential to boost the economy. “If farmers are able to secure good prices in the market, the Cambodian economy could grow even further,” he said.
A Foundation for Growth
The government continues to emphasize Cambodia’s strong foundation of peace, social order, and political stability as pillars of its economic success. These factors have enabled the country to achieve significant milestones, including attaining lower-middle-income status in 2015.
As Cambodia looks toward 2025 and beyond, the blend of steady growth, strategic reforms, and diversified industries positions the country as a resilient player in the global economy. Yet, addressing challenges such as high household debt and creating a more investor-friendly environment will be crucial in ensuring sustainable growth.
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