Cambodia Investment Review
The ASEAN+3 Macroeconomic Research Office (AMRO) forecasts the ASEAN+3 region to achieve steady economic growth of 4.2% in 2025, according to its latest quarterly update of the ASEAN+3 Regional Economic Outlook (AREO).
While the region is poised for robust performance, underpinned by strong domestic demand and export recovery, escalating trade tensions—particularly higher US tariffs on Chinese imports—pose significant risks to external demand. Cambodia, however, is projected to outpace many regional peers with a forecasted GDP growth of 5.7%, reflecting its dynamic domestic economy and growing investment opportunities.
Sustained Growth Amid Rising Headwinds
The ASEAN+3 region, which includes the 10 ASEAN member states plus China, Japan, and Korea, is set to maintain its 4.2% growth trajectory into 2025. This follows a similarly strong performance in 2024, driven by firm domestic consumption and recovery in manufacturing exports. Cambodia’s economy, bolstered by infrastructure projects and increasing foreign investment, is forecasted to grow by 5.7%, exceeding the ASEAN average of 4.8%.
Inflation across the region has eased significantly, returning to pre-pandemic levels, with headline inflation at 1.7% in 2024. Price pressures are expected to remain well-contained at 2.1% in 2025, despite risks from global commodity price spikes and adverse weather conditions. Cambodia’s inflation rate is projected to remain stable at a modest 1.5%, supporting consumer and business confidence.
Trade Tensions Cloud the Outlook
AMRO’s growth projection for 2025 is slightly lower than the 4.4% forecast in October 2024 due to anticipated trade disruptions. The US is expected to impose higher tariffs on Chinese goods in the latter half of the year, which could significantly impact the Plus-3 economies (China, Hong Kong, Japan, and Korea), now projected to grow at 4.0%. By contrast, ASEAN economies, including Cambodia, are forecasted to be less affected, with the bloc expected to expand by 4.8% in 2025.
“The global tech upcycle supported the region’s export performance in 2024, offsetting weaknesses in domestic consumption in some areas,” said AMRO Chief Economist Hoe Ee Khor. “However, rising trade tensions, particularly the imposition of higher US tariffs, could dampen external demand for the region and weigh on broader global growth.”
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Risks and Policy Challenges
AMRO highlights significant uncertainties facing the region’s economic outlook. These include potential shifts in US monetary policy, escalating trade tensions, and persistent inflationary pressures in advanced economies. The new US administration’s trade and fiscal policies, such as tariff increases and tax cuts, could exacerbate inflation risks and tighten external financial conditions for ASEAN+3 economies.
In response, many regional central banks have begun easing monetary policies amid declining inflationary pressures. However, the upward revision of US interest rate expectations may widen the gap between US and regional interest rates, complicating monetary policy management.
“Monetary policymakers in ASEAN+3 face a challenging balancing act,” noted Dr. Khor. “Easing domestic inflationary pressures provide room for policy adjustment, but external headwinds, including higher US rates, require cautious navigation.”
