Cambodia Investment Review
Cambodia’s economic activity saw an uptick in the first quarter of 2024, driven by a resurgence in services and goods exports, even as domestic demand remained subdued, according to the latest Cambodia Economic Update from the World Bank.
Economic growth for the year is forecasted to improve marginally to 5.8%, up from 5.6% in 2023. This upward trend is expected to continue, with growth projections of 6.1% for 2025 and 6.4% for 2026, spurred by a revival in exports of garments, travel goods, footwear, and a boost in tourism.
Strengthen Competitiveness By Improving The Business Climate
“To sustain economic growth, Cambodia needs to maintain macro-financial stability by restoring fiscal space and safeguarding its financial sector,” said Maryam Salim, World Bank Country Manager for Cambodia. “Cambodia can also strengthen competitiveness by improving the business climate, streamlining trade procedures at borders, making the energy supply more reliable, and strengthening education.”
The report highlights that international tourist arrivals have shown significant improvement, reaching 84% of pre-pandemic levels in the first quarter of the year. Additionally, exports of garments, travel goods, and footwear have rebounded, while non-garment exports, particularly agricultural commodities, have remained robust. The ASEAN region has become Cambodia’s second-largest export market after the United States, bolstered by rising foreign investment in manufacturing and agriculture.
Inflation has notably declined to zero as of March, driven by a deceleration in food prices. The current account registered an unprecedented surplus in 2023, as the trade deficit narrowed and tourism receipts increased.
Despite these positive trends, the construction sector continues to face challenges, with construction activity remaining subdued due to an ongoing property market correction. This has resulted in a significant slowdown in domestic credit growth, impacting private consumption and domestic revenue collection.
Special Focus On Strengthening Cambodia’s Education System
The World Bank report also includes a special focus on strengthening Cambodia’s education system to enhance worker skills and boost productivity. It recommends increased investment in early childhood and primary education, improving teacher effectiveness, and ensuring a more equitable distribution of resources.
“Education is a critical area that needs attention to support long-term economic growth,” said Salim. “Investing in early education and ensuring that resources are distributed equitably will help build a more skilled and productive workforce.”
The World Bank’s findings underscore the importance of strategic investments and policy measures to sustain and accelerate economic growth in Cambodia. By addressing key areas such as fiscal stability, business competitiveness, and education, Cambodia can build a more resilient and dynamic economy in the coming years.
