Tariffs cloud Cambodia’s economic outlook, ADB says

Tariffs cloud Cambodia’s economic outlook, ADB says

Cambodia’s economy is projected to grow by 6.1 percent this year, according to the Asian Development Outlook (ADO) April 2025 report released yesterday.

The ADO April 2025 estimates gross domestic product expanding by 6.1 percent in 2025 and 6.2 percent in 2026 after growing by 6.0 percent in 2024. However, downside risks to the outlook have increased due to global uncertainties, including trade policy in the United States, instability in the People’s Republic of China’s property sector, and ongoing geopolitical tensions affecting supply chains.

Addressing a press meet, Jyotsana Varma, ADB Country Director for Cambodia, said that Asia and the Pacific recorded solid economic growth of around five percent last year, primarily driven by strong domestic demand and a rebound in electronics exports.

Cambodia’s economy grew by 6 percent in 2024 and is projected to expand by 6.1 percent in 2025 and by 6.2 percent in 2026, driven by a rebound in both garment and non-garment manufacturing, along with a continued recovery in the tourism sector, she said.

“The positive economic outlook for Cambodia in 2025 and 2026 reflects the country’s potential for resilience and underlying strengths,” Varma emphasized.

“Even as global uncertainties persist, strategic investments in digital public infrastructure and human capital development will be crucial for economic diversification and unlocking new drivers for inclusive and sustainable growth.”

During the Q&A session, Varma told Khmer Times that the ADB remains confident in the Royal Government’s policies, its measured response, and commitment to diversifying the export basket, particularly for high-volume goods.

“The Royal Government has established a robust trading framework by enhancing trade flows with RCEP partners, along with several recently negotiated free trade agreements, some of which have already been implemented, as well as trade cooperation with ASEAN countries,” she added.

In response to a question about tourism data, which shows that Cambodia welcomed over 1.26 million visitors by February, the ADB officials noted that although the numbers are substantial, the quality of tourism in terms of visitor spending behavior has not yet returned to pre-pandemic levels.

During the meeting, Country Economist Milan Thomas and Principal Economics Officer Poullang Doung presented the global and regional context alongside an update on Cambodia’s economic outlook.

Thomas provided insights on several key issues, including the global baseline outlook, risks stemming from trade policy uncertainty, Cambodia’s economic performance in 2024 and baseline projections for 2025 and 2026. He also highlighted policy challenges related to digital transformation.

Doung gave a detailed overview of the country’s economic acceleration last year, the fiscal deficit of approximately $900 million and the decline in both revenue and expenditure compared to 2023.

He noted that economic growth in 2025 and 2026 is expected to remain above the five-year moving average, supported by increasing external demand for manufactured goods and the ongoing recovery of the tourism sector.

The ADO April 2025 forecasts were finalised prior to the April 2 announcement of new tariffs by the US, and the baseline projections only account for tariffs that were in place as of March this year.

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