TheReporterAsia – The Cambodian economy is poised for robust growth in the coming years, driven by a recovery in exports, tourism, and foreign direct investment (FDI). The country’s GDP is projected to expand by 5.8% in 2024 and 6.2% in 2025, according to TRIS Rating. This positive outlook is underpinned by several key factors, including a rebound in domestic demand, increased international tourist arrivals, and a favorable FDI climate. The manufacturing sector is expected to play a pivotal role in driving this growth, supported by Cambodia’s young workforce and competitive labor costs.
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Inflation remains well-anchored compared to regional peers, with projections of 3.0% and 3.2% for 2024 and 2025, respectively. This stability can be attributed to factors such as the predominance of domestically produced food and a stable exchange rate. The current account balance, which improved significantly in 2023 due to gold import restrictions and a tourism rebound, is expected to moderate in the coming years as imports of intermediate and capital goods pick up.
Cambodia’s external position remains robust, with adequate international reserves to cushion against external shocks. The country’s reserves are projected to normalize to 9-10 months of goods imports in 2024-2025, supported by rising service and direct investment balances. The fiscal balance is also expected to improve, aided by fiscal consolidation efforts.
The tourism sector is showing promising signs of recovery, with international tourist arrivals steadily increasing.The continued rebound in tourism is expected to boost the services balance and private consumption. The government’s efforts to diversify export markets and attract FDI into new sectors are also bearing fruit, with recently signed free trade agreements with China, the Regional Comprehensive Economic Partnership (RCEP), and South Korea opening up new opportunities.
However, challenges remain. The country’s dependence on low-value-added exports, particularly in the garment sector,poses a risk. The concentration of exports to a few key markets, notably the United States, also underscores the need for further diversification. Additionally, the high level of external debt held by deposit-taking corporations warrants attention.
Overall, Cambodia’s economic prospects are bright. The country’s strong growth trajectory, anchored inflation, and robust external position provide a solid foundation for sustainable development. However, addressing key challenges such as export diversification and external debt management will be crucial to ensuring long-term economic resilience.
Key Statistics:
- Real GDP growth: 5.8% (2024F), 6.2% (2025F)
- Inflation rate: 3.0% (2024F), 3.2% (2025F)
- Current account balance (% of GDP): -0.8% (2024F), -3.1% (2025F)
- Foreign currency reserves (months of goods imports): 9.2 (2024F), 10.0 (2025F)
- Fiscal balance (% of GDP): -1.5% (2024F), -1.0% (2025F)
- International tourist arrivals: 4.6 million (2023)
- Foreign tourist receipts to total exports: 13.2% (2023)
- Goods exports growth: 1.9% (2023)
- Goods imports contraction: 16.8% (2023)
Key Opportunities:
- Manufacturing sector growth: Driven by competitive labor costs and a young workforce
- Tourism recovery: Boosting the services balance and private consumption
- FDI inflows: Attracted by new FTAs and favorable investment climate
- Export diversification: Reducing reliance on low-value-added exports and key markets
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