Cambodia Investment Review
The ASEAN+3 Macroeconomic Research Office (AMRO) forecasts steady economic growth for the ASEAN+3 region, projecting a 4.2 percent expansion in 2024, with an improvement to 4.4 percent in 2025, according to the latest quarterly update of the ASEAN+3 Regional Economic Outlook (AREO). Despite a slight downward revision from its previous estimate, AMRO remains optimistic about the region’s growth prospects, driven by external trade recovery, a rebound in tourism, and strong domestic demand.
Cambodia, one of the fastest-growing economies in the region, is projected to outpace its regional peers, with forecasts of 5.6 percent growth in 2024 and 5.9 percent in 2025. This performance contrasts with the overall ASEAN+3 region, which faces challenges related to external uncertainties and financial market volatility.
External Risks and Regional Outlook
The ASEAN+3 region, comprising the 10 ASEAN countries, along with China, Hong Kong, Japan, and Korea, continues to face external risks, particularly from the global economic slowdown and rising geopolitical tensions. AMRO’s latest projection marks a slight adjustment from its July 2024 forecast of 4.4 percent for 2024, largely due to revisions for China and Vietnam. China, the largest economy in the region, has implemented a series of stimulus measures to boost its domestic economy, but growth is still expected to slow, impacting the broader region.
According to AMRO Chief Economist Hoe Ee Khor, “Recent developments have shifted the risk landscape for the ASEAN+3 region. The sharp but short-lived market adjustments in early August serve as a reminder of the potential for further spikes in financial market volatility.” He added that the possibility of increased protectionist policies, especially following the US presidential election, remains a significant concern for the region’s economic stability.
Despite these challenges, AMRO expects the ASEAN+3 economies to experience stable growth in 2025, with a projected 4.4 percent expansion, supported by resilient domestic demand and easing financial conditions. ASEAN itself is expected to grow by 4.7 percent in 2024, slightly higher than the overall regional average, underscoring the group’s relative stability amid external uncertainties.
In addition to external trade risks, inflationary pressures in the region are projected to ease. Excluding Lao PDR and Myanmar, inflation in the ASEAN+3 region is expected to moderate to 1.9 percent in 2024, down from the previous forecast of 2.1 percent. This reflects expectations of a cooling global inflation environment, which is likely to benefit the region’s overall economic performance.
Cambodia’s Economic Prospects and Regional Comparison
Cambodia stands out within the ASEAN+3 region, with its projected growth rates for 2024 and 2025 exceeding the regional averages. The country’s strong performance is attributed to a recovery in its garment sector, a key driver of its economy, alongside continued growth in non-garment manufacturing. In contrast, many ASEAN+3 economies are grappling with the effects of slowing global demand and geopolitical uncertainty.
However, Cambodia’s growth story is not without challenges. The 2024 Annual Consultation Report on Cambodia, also published by AMRO, highlights both external and domestic risks that could affect its economic trajectory. The report points to vulnerabilities in the banking sector, specifically related to declining asset quality, as well as potential weaknesses in the real estate market. Addressing these issues will be critical to ensuring Cambodia’s long-term economic stability.
“The path toward a strong economic recovery in Cambodia is confronted with both external and domestic challenges,” AMRO’s report notes. While the country has shown resilience in its post-pandemic recovery, mitigating financial stability risks and improving the supervision of the real estate sector will be key priorities moving forward.
Potential Global Slowdown Could Impact Export-Driven Sectors
Chief Economist Hoe Ee Khor’s remarks on regional risks resonate particularly for Cambodia, where external challenges such as a potential global slowdown could impact export-driven sectors. Domestically, the need to strengthen financial regulations and mitigate risks in the real estate market remain pressing concerns. Nevertheless, Cambodia’s growth prospects remain robust, supported by strong domestic demand and the government’s efforts to rebuild policy space following the pandemic.
AMRO’s projections for Cambodia indicate that its growth trajectory is likely to continue, but only if these risks are effectively managed. While the region faces uncertainties from the US economic outlook, particularly regarding trade tensions with China, Cambodia’s focus on diversifying its economy and addressing vulnerabilities in key sectors should help maintain its growth momentum.
As the ASEAN+3 region prepares for a potentially turbulent global economic environment, Cambodia’s ability to navigate these challenges will be crucial in determining its role as one of the region’s standout economies.
