Phnom Penh, June 11, 2025- Cambodia's economy has shown resilience, largely thanks to strong exports and a partial revival in private consumption, despite heightened global uncertainty. To maintain growth amid uncertainty, Cambodia will need to focus on diversifying its economy and creating an enabling environment for private sector investment and job creation.
According to the World Bank's Cambodia Country Economic Update: Navigating Uncertainty with a special focus section entitled Strengthening Revenues for Cambodia's Future, released today, Cambodia's economic growth is projected to slow to 4.0% in 2025 and 4.5% in 2026, as the country faces global and domestic headwinds, including global uncertainty, shifts in trade policies, a prolonged downturn in the property sector, and a tightening credit cycle.
"Economic diversification is critical for Cambodia to sustain growth and job creation amid uncertainty, especially by moving beyond its reliance on construction and garment exports and promoting higher value-added manufacturing and services" said World Bank Country Manager for Cambodia, Tania Meyer. "Revenue reforms can support a better business environment while generating fiscal space for critical investments in human capital and infrastructure".
Cambodia's exports, especially garments, travel goods, footwear, and bicycles grew by 11.6% year-on-year in the first quarter of the year. Tourism services saw an increase of 16.1% in international arrivals, albeit remaining below 2019 levels. Meanwhile private consumption recovered, as evidenced by increased imports of consumption goods, including foodstuffs, garments, cars, and motorcycles.
On the external side, rising remittances and tourism revenues offset a widening trade deficit, with reserves reaching US$24.7 billion. Broad money growth hit 19.0% year-on-year, driven by favorable monetary conditions. Inflation picked up slightly to 3.7%, mainly due to food prices, while financial sector asset quality deteriorated, with higher nonperforming loan ratios.
The report's special focus examines how tax reforms can support a more growth-friendly business environment while generating fiscal space for critical investments in human capital and infrastructure-key to achieving Cambodia's vision of becoming a high-income country by 2050. The section raises three interrelated dimensions that underscore the importance of comprehensive reforms, namely: mobilizing sufficient resources to meet critical development investments; strengthening the business climate through a more efficient and predictable tax system; and promoting equity by ensuring a fairer distribution of the tax burden and addressing social and environmental harms.
