Cambodia Investment Review
The Asian Development Bank (ADB) has maintained its growth forecast for Cambodia at 5.8% for 2024 and 6.0% for 2025, while revising its inflation projection for 2024 down from 2.0% to 0.5%. The updated forecasts, outlined in the Asian Development Outlook (ADO) September 2024 report, come as Cambodia experiences a rebound in key sectors such as manufacturing, agriculture, and tourism.
ADB Country Director for Cambodia, Jyotsana Varma, emphasized that manufacturing, particularly in garments, footwear, and travel goods (GFT), is a critical driver of the nation’s economic growth. “The rebound in the manufacturing sector—especially garments, footwear, and travel goods (GFT)—is powering the country’s economic growth,” Varma stated. She added that agriculture and tourism are “steadily gaining ground,” while foreign direct investment (FDI) inflows continue to support the country’s economic momentum. “Together, these forces are setting the stage for a promising 2024 and positioning Cambodia for robust growth in 2025 and beyond,” she concluded.
GFT Exports Surge, Inflation Projection Lowered
The report highlighted that GFT exports saw a significant increase of 16.9% year on year in the first half of 2024, recovering from an 18.6% decline during the same period in 2023. However, growth in exports of non-GFT products slowed to 1.3% year on year from 21.2%. Meanwhile, imports of construction materials and equipment surged by 23.3% year on year, largely driven by public infrastructure projects, underscoring Cambodia’s ongoing development focus.
The ADB’s downward revision of Cambodia’s inflation projection for 2024 to 0.5% is a reflection of a slower-than-expected rise in food prices and a decline in fuel prices during the first half of the year. According to the report, lower prices for fuel-related goods and services, coupled with reduced fertilizer costs, have provided much-needed relief for the agricultural sector, which is projected to grow by 1.2% in 2024 and 1.3% in 2025.
Varma noted the positive effects of these economic shifts, particularly for vulnerable populations. “This will provide much-needed relief for people, especially the most vulnerable, who have faced challenges in recent years due to rising food and fuel prices,” she said.
Tourism Recovery, Foreign Investment, and Risks Ahead
Tourism, a key pillar of Cambodia’s economy, continues to recover strongly. Tourist arrivals increased by 22.7% year on year in the first half of 2024, reaching 94.8% of pre-pandemic levels from the same period in 2019. This growth in tourism is expected to contribute to service sector growth of 5.4% in 2024, tapering to 5.2% in 2025.
Foreign direct investment inflows, which have been a major source of capital for Cambodia’s development, reached $2 billion by mid-2024, slightly down from $2.1 billion during the same period last year. While nonfinancial sectors saw continued growth in investment, the financial sector experienced a notable slowdown due to lower banking profits.
Despite these positive trends, the ADB report also identified several potential risks to Cambodia’s economic outlook. Weaker growth in key economies such as China, Europe, and the United States could pose challenges, as could Cambodia’s high levels of private debt and fluctuating global fuel prices. Additionally, the country remains vulnerable to extreme weather events, which could have severe impacts on its agriculture and infrastructure sectors.
Looking Ahead: Opportunities and Challenges for 2025
The ADB, founded in 1966, remains committed to supporting Cambodia’s development through inclusive, resilient, and sustainable growth. With 68 members, including 49 from within the Asia-Pacific region, the bank has played a pivotal role in financing and guiding economic development across the region, with Cambodia being a key focus in recent years.
As Cambodia continues to navigate its post-pandemic recovery, sectors like manufacturing, agriculture, and tourism are set to shape the country’s economic landscape. However, uncertainties remain, and the government will need to carefully manage domestic and external risks to sustain the growth trajectory forecasted by the ADB.
For Cambodia, 2024 is shaping up to be a pivotal year, with many sectors recovering and new investments flowing into infrastructure and development projects. The next few years will likely test the resilience of these growth sectors and the overall economy, as the nation strives to achieve robust, sustainable growth well into 2025 and beyond.
