Cambodia Investment Review
The Cambodian economy is set to experience an acceleration in growth rates in the next two years, buoyed by a returning tourism sector and robust manufacturing activities, the Asian Development Bank (ADB) outlined in its latest Asian Development Outlook (ADO) report for April 2024. The forecasted growth rates of 5.8% for 2024 and an even more optimistic 6.0% for 2025 signal a healthy recovery trajectory for the nation.
The ADO report highlighted that despite facing a milieu of global economic uncertainties, Cambodia’s economy has showcased resilience with a commendable performance in 2023. “Cambodia’s economy has navigated through global economic challenges commendably well in 2023,” commented Ms. Jyotsana Varma, ADB’s Country Director for Cambodia. Varma anticipates a continuation of this robust growth pattern into 2024 and 2025, largely propelled by the garments, footwear, and travel goods (GFT) sector which is expected to leverage the positive momentum gained in the latter part of 2023.
Cambodian Government Is Gearing Up For A Gradual Fiscal Consolidation
2023’s economic growth, estimated at 5.0%, was primarily fueled by a significant recovery in tourism and consistent manufacturing activities beyond the GFT sector. The forthcoming years are projected to see sustained economic expansion, backed by an upswing in export-oriented manufacturing. Additionally, the report forecasts a stable inflation rate at around 2.0% for the next two years, following a 2.1% average in 2023, aided by decreasing global energy prices.
The Cambodian government is gearing up for a gradual fiscal consolidation starting from 2024 with an aim to replenish the reserves that were depleted during the pandemic. However, the ADB report also cautions about potential hurdles that could dampen economic prospects in the long term, including possible global economic downturns, the rising tide of private debt, volatile energy prices, and climate vulnerabilities.
Varma addressed these concerns by stating, “These challenges introduce a degree of complexity to the economic landscape of Cambodia. Nevertheless, the nation is advancing with a strategy of cautious optimism.”
A significant focus of the ADO report is on Cambodia’s preparation for its graduation from the United Nations’ least-developed country (LDC) category by 2027. This anticipated elevation is expected to boost Cambodia’s international standing and appeal to investors. However, it also presents challenges, particularly in terms of reduced access to concessional financing and preferential trade benefits that have been pivotal in driving sectors critical for high growth and employment.
Imperative For Cambodia To Amplify Its Global Economic Integration
The report underscores the imperative for Cambodia to amplify its global economic integration, diversify markets, pivot towards higher value-added products, and invest in sustainable infrastructure and human capital. Moreover, enhancing domestic resource mobilization is highlighted as crucial for navigating this transitional phase effectively.
ADB, with its vision of fostering a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, remains dedicated to supporting Cambodia in its journey towards economic resilience and sustainability. Since its establishment in 1966, ADB has grown to include 68 member countries, with 49 hailing from within the Asia-Pacific region, all united in the endeavor to eradicate extreme poverty.cambodiainvestmentreview
