Cambodia’s economy is expected to decelerate in 2025 and 2026, driven by the impact of US tariffs and a sluggish real estate market, despite robust growth in the services sector. Policy recommendations emphasize the need for economic diversification and enhanced fiscal flexibility.
Economic Overview
Cambodia’s economy is expected to slow in 2025 and 2026 due to US tariffs and declining real estate activity, despite a strong services sector. The 2025 Annual Consultation Report by the ASEAN+3 Macroeconomic Research Office (AMRO) outlines these challenges. The report, based on an April consultation visit, stresses the need for targeted fiscal support and market diversification to boost resilience amid global trade tensions.
Economic Risks
Cambodia faces increased uncertainties, mainly external. The economy grew by 6.0% in 2024, up from 5.0% in 2023, but the growth rate is projected to slow to 5.2% in 2025 and 4.7% in 2026 due to potential tariffs. Inflation is trending downward but remains uncertain, potentially rising to 2.5% in 2025 due to food price fluctuations. The trade deficit is expected to widen, and public debt may rise to 27.2% of GDP.
Policy Recommendations
The government’s tariff reduction on US goods is a positive step. Regional cooperation and export diversification should be prioritized. Fiscal policy needs agility, balancing sustainability with development goals. AMRO recommends maintaining an accommodative policy stance, strengthening macroprudential frameworks, and enhancing data collection for evidence-based policymaking. Effective implementation of structural reforms and inter-ministerial coordination are vital for sustainable growth.
