The surge in manufacturing exports—especially in garment, travel goods and footwear; the revival of the travel and tourism industries; and the continued inflow of foreign direct investment (FDI) have helped sustain this year’s economic recovery, the update noted.
Cambodia’s economic growth this year is projected to reach 5.3 per cent compared to 5 per cent in 2023, driven primarily by services and goods exports, the World Bank has said.
The surge in manufacturing exports—especially in garment, travel goods and footwear; the revival of the travel and tourism industries; and the continued inflow of FDI have helped sustain the recovery.
In the short term, Cambodia’s real gross domestic product (GDP) growth is projected to marginally improve, reaching 5.5 per cent in 2025 and 2026.
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 World Bank 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.
In addition, the negative wealth effects of falling house prices and notably high household debt, with debt service payments close to 50 per cent of income, are likely to constrain consumption going forward.
While manufacturing exports—especially in garments, travel goods, and footwear—will remain susceptible to external demand, agricultural production and agro-processing industries continue to be boosted by bilateral and multilateral free trade agreements.
The travel, transport, and logistics industry should benefit from strong private investment in several key infrastructure projects, such as a newly built expressway linking Phnom Penh to Sihanoukville, where a deep-sea port is located; new logistics complex and multimodal port development projects in Kampot and Phnom Penh; and a new expressway project linking Phnom Penh to Bavet, on the Cambodia-Vietnam border.
With subdued private consumption due to the prolonged downturn in the property sector, external imbalances are expected to improve in the short to medium term, the World bank observed.
Despite continued improvements, the economy is facing downside risks, including weaker-than-expected global demand amid rising debt and elevated borrowing costs, and a sharper-than-anticipated slowdown in China.
Cambodia’s small, open economy, with a trade-to-GDP ratio of 112 per cent in 2023, faces risks from geo-economic fragmentation and rising protectionism.
Domestically, a faster-than-expected increase in non-performing loans could affect macro-financial stability as the housing market correction continues, the update added.
Fibre2Fashion News Desk (DS)
