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International trade

Cambodia's Economy Faces Uncertainty Amid Global Trade Tensions

Strategic Insights

— 1 min read

Cambodia's economy is projected to moderate in 2025 and 2026 following the 6.0 percent expansion in 2024, reflecting the impact of US tariffs and subdued real estate activity. Despite continued strength in the services sector, the country faces increased uncertainties driven by external factors, alongside emerging challenges within the domestic financial sector. The ASEAN+3 Macroeconomic Research Office (AMRO) emphasizes the need for a coordinated and multifaceted policy response to enhance economic resilience.

Key Takeaways:

  • Cambodia's economy is highly sensitive to the eventual magnitude of US tariffs, with growth expected to slow to 5.2 percent in 2025 and 4.7 percent in 2026 if the planned tariffs take effect.
  • Inflation is expected to rise to 2.5 percent in 2025 due to base effects, before moderating to 2.3 percent in 2026, but remains uncertain due to fluctuations in food prices.
  • Cambodia's external position is expected to register a deficit, mainly due to the widening trade deficit, with the current account balance projected to record a deficit of 3.5 percent of GDP in 2025 and 5.4 percent in 2026.
  • The fiscal deficit is projected to widen in 2025, reflecting the government's ongoing efforts to normalise public spending, with public debt expected to rise to 27.2 percent of GDP.
  • Credit growth remains at a historic low, while asset quality in the banking sector is deteriorating, which could weaken bank profitability and capital adequacy.
  • The government should prioritize export diversification, improvements in domestic competitiveness, and fiscal policy that balances sustainability and development goals.

Statistics:

  • Cambodia's economy expanded by 6.0 percent in 2024.
  • The country's current account balance registered a surplus of 0.5 percent of GDP in 2024, while FDI inflows remained robust at 9.2 percent of GDP.
  • The fiscal deficit is projected to widen in 2025, with public debt expected to rise to 27.2 percent of GDP.
  • Inflation is expected to rise to 2.5 percent in 2025, before moderating to 2.3 percent in 2026.
  • Credit growth remains at a historic low, with asset quality in the banking sector deteriorating.

Sources:

  • AMRO. (2025). 2025 Annual Consultation Report on Cambodia.
  • ASEAN+3 Macroeconomic Research Office. (2025). Annual Consultation Visit to Cambodia Report.

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