PHNOM PENH – Cambodia is predicted to see a slight economic growth to 5.8 percent in 2025, up from 5.5 percent in 2024, thanks to recoveries in trade and tourism, the International Monetary Fund (IMF) reported. 

However, it warns that the economy is vulnerable to a global shift and suggests growth be maintained to secure the goals to graduate from the Lease Developed Country (LDC) status and reach upper-middle-income status by 2030. 

Although economic recovery continues, the pace remains uneven. The growth is credited to the continued recovery of tourism and exports despite the uneven recovery, the IMF said in a report. The non-tradable sector is anticipated to remain weak due to a decrease in domestic demand.

The IMF predicts inflation will rise from 0.5 percent in 2024 to two percent in 2025, as the real GDP is significantly below the pre-pandemic trend. 

The national economy is at risk due to global macroeconomic conditions, major policy changes affecting major trading partners, and geoeconomic fragmentation, which could potentially disrupt trade and foreign direct investment flows.

Cambodia's graduation from LDC status in 2027-2030 will impact export preferential treatment, necessitating a durable recovery and high-quality growth for development and achieving upper-middle-income status by 2030, the IMF said.

“Executive Directors welcomed the continuing recovery of the Cambodian economy, driven by strong growth in garment and agricultural exports, and improving tourism activity,” the report said.

“Nonetheless, the recovery has been uneven, and while growth is expected to continue, risks to the outlook are tilted to the downside.”

Since late 2023, the growth in garment and agriculture exports has risen due to global demand and because regional trade partners such as Bangladesh and Myanmar were grippled by social unrest and conflict.

Solar-related exports, on the other hand, have significantly decreased due to the US’s anti-dumping duties ruling on China-originating solar products exported by select firms circumventing tariffs through Cambodia and other regional countries.

Trade volume in 2024 was $54.74 billion, up 16.9 percent on 2023. Exports amounted to $26.2 billion and imports $28.54 billion. The country exported mostly apparel and clothing accessories, cereals, rubbers, travel goods and electrical machinery.

Tourism receipts recovery slows due to the shift in arrivals, with inbound tourism mainly from ASEAN neighbors and fewer air arrivals, replacing high-spending Chinese tourists.

“The sharp slowdown in credit growth has exposed the economy to increased financial sector vulnerabilities. Policy formulation must ensure a durable and inclusive recovery in the near term and achieve development goals over the medium term,” the report says.

Cambodia’s authorities, during the discussion, acknowledged risks due to slow global growth and geo-economic fragmentation but pledged to support economic recovery and resilience through sound policy measures.

They pledged to maintain fiscal sustainability, rationalize tax exemption, monitor financial stability risks, and push for structural reforms to boost economic diversification and competitiveness.

Authorities are reaffirming their commitment to governance and anti-corruption, focusing on judicial reforms and strengthening the rule of law, while addressing data collection gaps in areas such as real estate, corporate debt, and non-bank financial institutions.