ASIATODAY.ID, PHNOM PENH — Cambodia’s economy is set to slow sharply in 2026, with growth projected to ease to 3% as higher energy prices, weakening tourism, subdued domestic demand, and financial sector vulnerabilities increasingly weigh on Southeast Asia’s trade-dependent economy.
The forecast was released by the International Monetary Fund (IMF) following its 2026 Article IV consultation with the Cambodian government, concluding that the country’s post-pandemic recovery is losing momentum amid mounting domestic and global headwinds.
Cambodia’s real GDP growth slowed to 5.3% in 2025 from 6.0% in 2024 and is expected to decelerate further this year before gradually recovering in 2027.
According to the IMF, rising global energy prices, softer external demand, uncertainty over international trade policies, and reputational damage associated with online scam operations have weakened economic activity, reduced tourism demand, and increased risks to financial stability.
Inflation is also expected to accelerate significantly. After averaging 2.5% in 2025, consumer prices are projected to rise by 5.6% this year, largely driven by higher fuel and energy costs. While inflation is expected to moderate in 2027, the IMF warned that upside risks remain elevated.
Despite the weaker outlook, Cambodia continues to benefit from resilient foreign direct investment and adequate foreign exchange reserves, equivalent to around eight months of imports, providing an important buffer against external shocks.
The IMF nevertheless cautioned that risks remain firmly tilted to the downside. Prolonged energy market volatility, weaker global demand, climate-related disruptions, and continued uncertainty over international trade could further undermine growth, while persistent weakness in the property sector poses additional risks to the banking system.
To cushion near-term shocks, the IMF urged the government to provide temporary and targeted support for vulnerable households and affected businesses while maintaining fiscal discipline. The Fund also recommended gradually phasing out broad fuel subsidies as price pressures ease and strengthening domestic revenue mobilization to finance long-term development priorities without undermining debt sustainability.
The IMF further called for stronger financial sector oversight following the expiration of pandemic-era regulatory relief measures. It urged regulators to ensure timely recognition of impaired assets, strengthen banking supervision, and reinforce crisis management and bank resolution frameworks to safeguard financial stability.
Looking beyond the immediate challenges, the Fund stressed that Cambodia must accelerate structural reforms as it prepares to graduate from Least Developed Country (LDC) status. Improving the business climate, strengthening governance and the rule of law, expanding skilled employment, diversifying exports, attracting higher-quality investment, enhancing energy security, and building climate resilience will be critical to sustaining long-term growth.
The IMF concluded that while Cambodia remains one of Southeast Asia’s most resilient emerging economies, decisive reforms will be essential to restore stronger growth, reinforce investor confidence, and secure sustainable economic development in an increasingly uncertain global environment. (AT Network)
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