Cambodia Investment Review
Cambodia’s economic growth is expected to slow in 2026 as rising global oil prices and external uncertainties weigh on the country’s outlook, according to a new assessment by the ASEAN+3 Macroeconomic Research Office.
The regional macroeconomic surveillance body said Cambodia’s economy expanded by an estimated 5.3 percent in 2025, demonstrating resilience amid global shocks, but is projected to moderate further to 4.3 percent in 2026.
Growth outlook faces external pressure
AMRO said Cambodia’s performance in 2025 was supported by strong garment exports, continued foreign direct investment inflows, and relatively swift policy responses.
However, the outlook for 2026 is increasingly constrained by higher global oil prices, weaker tourism receipts, and ongoing uncertainty linked to global trade tensions and geopolitical developments.
Inflation, which averaged 2.5 percent in 2025, is projected to rise to 3.9 percent in 2026, largely driven by energy costs.
The country’s external position is also expected to weaken. The current account deficit widened to 3.6 percent of GDP in 2025 and is forecast to expand significantly to 8.5 percent in 2026, reflecting rising energy import costs, softer tourism recovery, and a decline in remittances following the return of migrant workers from Thailand.
Despite these pressures, AMRO noted that foreign direct investment inflows have remained relatively resilient, providing some support to the broader economy.
Banking sector and real estate remain areas of concern
The report highlighted emerging vulnerabilities within Cambodia’s financial system, particularly elevated non-performing loans, which remain above 8 percent.
Credit growth showed some improvement in 2025 but remained subdued, while the real estate sector continues to face oversupply and weak demand, adding further strain to the financial system.
Recent bank liquidations have also contributed to heightened concerns around financial stability, underscoring the need for stronger oversight and resolution frameworks.
On the fiscal side, Cambodia’s deficit narrowed to 1.0 percent of GDP in 2025, supported by improved revenue collection and controlled spending. However, the deficit is expected to widen again in 2026 due to increased expenditure related to border security and higher energy costs.
Public debt remains relatively low and stable at below 30 percent of GDP, providing some fiscal space for targeted interventions.
Policy response seen as critical to maintaining resilience
AMRO said proactive and targeted policy measures will be essential to help Cambodia navigate the current environment.
Fiscal policy should remain flexible, including temporary and targeted support to vulnerable households and businesses affected by higher energy prices and border-related disruptions, while maintaining a medium-term focus on rebuilding fiscal buffers.
Monetary policy, led by the National Bank of Cambodia, should continue to support economic activity while remaining vigilant to inflation and financial stability risks. The report called for strengthened credit intermediation, accelerated resolution of non-performing loans, reinforcement of bank capital buffers, and enhanced liquidity oversight.
AMRO also emphasized the need to further develop the bank resolution framework to better manage potential financial sector stress.
Beyond near-term measures, structural reforms were identified as critical to sustaining growth. These include enhancing energy and food security, diversifying export markets, strengthening infrastructure, and promoting higher domestic value-added in exports.
Labor market reforms and expanded social protection were also highlighted as important tools to support workers affected by the border conflict and facilitate the reintegration of returning migrants into the domestic economy.
Cambodia is also approaching its planned graduation from least developed country status by 2029, a transition that could affect export competitiveness and borrowing costs if not carefully managed.
AMRO said sustained reform momentum, combined with timely and effective policy implementation, will be key to ensuring Cambodia remains resilient amid a more uncertain global economic environment.
