The International Monetary Fund’s latest outlook for the Cambodian economy forecasts growth to increase to 5.8 percent this year from 5.5 percent last year, but warns of serious downside risks from external and domestic factors.
“Cambodia’s economy has continued to recover, albeit at a modest pace,” it said in the outlook released on Monday.
“The recovery remains uneven.
“Risks to the outlook are tilted to the downside from both external factors and domestic vulnerabilities, including from policy changes by major trading partners, geoeconomic fragmentation, and continued weakness in the construction and real estate sectors.”
The IMF report echoes a warning in October by the ASEAN+3 Macroeconomic Research Office (AMRO) on a surge of inward-looking policies – geoeconomic fragmentation – by global economies, led by the US under President Donald Trump.
“Protectionism is on the rise, and we’re also witnessing a trend of deglobalisation,” leading Cambodian economist Duch Darin told Khmer Times’ Business Talk-Money Matters this month.
Deglobalisation, according to Darin, refers to a reduction in interconnectedness and interdependencies among global economies – a trend that has been amplified under the Trump administration.
“We’ve seen the continuation of protectionist measures, such as a 10 percent general tariff for all nations, a 60 percent tariff on Chinese goods entering the United States, and a 25 percent tariff on Canadian and Mexican goods entering the US,” he said.
“This is a new trend that the world is currently facing, and it is a concern for many economists and people around the world.”
The IMF forecast of 5.8 percent growth in 2025 compares with the Cambodian government’s projection of 6.3 percent outlined in its medium-term public finance framework this month.
The World Bank forecast for 2025 is 5.5 percent and the Asian Development Bank’s projection is 5.8 percent.
AMRO has forecast an average 4.2 percent economic growth across the ASEAN+3 grouping, which includes the ASEAN nations, China, Japan and South Korea.
Royal University of Phnom Penh analyst Thong Mengdavid told Khmer Times yesterday 2025 was shaping up as a good year for the Kingdom’s economy as government policies underpinned continued recovery.
“Cambodia’s geoeconomic and demographic advantages are very favourable … and the government is pursuing economic diversification and regional integration such as with ASEAN, Eurasia and the EU to attract more foreign investment,” said Mengdavid.
The IMF said Cambodia’s GDP growth “is driven mainly by external demand, with a strong rebound in garment exports and high growth in agricultural exports”.
It said tourism – one of the “four pillars” of Cambodia’s economy along with garments, agriculture and construction – had experienced a “structural shift,” which had slowed its post-Covid recovery.
“The construction and real estate sectors are undergoing a correction, with rising non-performing loans and emerging signs of private-sector debt overhang,” the IMF report said.
“After a sustained credit expansion that lifted the credit-to-GDP ratio from 24 percent in 2010 to 135 percent in 2023, credit growth has come to a near halt.”
But the IMF said public debt is well under control, expected to be below 30 percent of GDP over the next decade.
The IMF sees inflation rising to 2 percent and remaining contained this year from 0.5 percent last year.
That compares with AMRO’s projection of an average 2.1 percent inflation across the ASEAN+3 countries.
The IMF urged the government to continue tax reforms, including rationalising exemptions, continue structural economic reforms, boost labour force skills and promote renewable energy.
