WB lifts Cambodia’s 2025 growth forecast to 4.8%

WB lifts Cambodia’s 2025 growth forecast to 4.8%

Cambodia’s economy remains strong despite global headwinds, with steady growth expected over the coming years, underpinned by sound government policies, export diversification and a firm commitment to reform.

Cambodia’s economy is projected to grow by 4.8 percent in 2025 before moderating to 4.3 percent in 2026, reflecting resilient domestic activity but mounting external pressures, according to the World Bank’s East Asia and Pacific Economic Update – October 2025 released on Tuesday.

The country’s economic performance remains above the global average but faces heightened uncertainty due to rising trade protection and a less favourable global environment.

The World Bank notes that Cambodia is among the East Asia and Pacific economies most exposed to the recent increase in United States “reciprocal tariffs”.

While economies such as Thailand, Vietnam, the Philippines and Malaysia are less affected because their exports are concentrated in electronics and semiconductors, Cambodia’s reliance on apparel exports makes it particularly vulnerable to higher tariffs.

These measures are expected to weigh on export performance and real incomes, given that Cambodia’s domestic value added in exports to the US is a significant share of its output compared to some regional peers.

Cambodia’s projected growth rate for 2025 remains robust by regional standards, ahead of Thailand’s 2.0 percent and Lao PDR’s 3.7 percent. However, the World Bank warns that higher foreign tariffs could have negative effects on both exports and employment.

Evidence from small open economies, including Cambodia, indicates that tariff shocks can significantly reduce export volumes and slow job creation. This vulnerability underscores the importance of export diversification and policy measures to strengthen the economy’s resilience to external shocks.

Tourism continues to play an important role in Cambodia’s recovery. The report highlights that tourist arrivals have returned to or surpassed pre-pandemic levels in Cambodia, Fiji, Malaysia and Viet Nam. Nevertheless, discretionary spending by tourists remains below pre-pandemic trends, which limits the overall contribution of the sector to growth.

Private consumption has been a key driver of economic activity, supported by steady retail sales, although consumer confidence has not fully recovered to pre-COVID levels across the region.

Investment sentiment remains subdued amid global uncertainty, which could weigh on growth momentum.

Cambodia’s youthful labour force sets it apart from ageing economies such as China and Thailand. This demographic structure offers long-term growth opportunities but also presents challenges in creating sufficient productive jobs.

The report notes that while employment rates are generally high across the region, young people face persistent difficulties in finding decent work. Labour force participation in Cambodia remains among the highest in the region, at around 80 percent, yet job opportunities are increasingly concentrated in low-productivity sectors. Shifts from agriculture to low-wage services rather than higher-skilled manufacturing have limited productivity gains, reflecting wider regional trends.

The World Bank emphasises that supporting near-term growth through fiscal measures alone may yield less durable benefits than deeper structural reforms. For Cambodia, sustained growth will depend on its ability to adapt to shifting global trade patterns, diversify its export base, improve the investment climate and invest in human capital.

The report calls for reforms to reduce trade barriers, improve infrastructure and strengthen skills development to help economies like Cambodia weather external headwinds and create more productive jobs over the medium term.

Cambodia’s economy remains strong despite global headwinds, with steady growth expected over the coming years, underpinned by sound government policies, export diversification and a firm commitment to reform, according to economist Darin Duch.

Speaking to Khmer Times, Darin said that the World Bank’s outlook for Cambodia remains positive as the country continues to build on its economic strengths.

“Cambodia’s economy remains robust in the face of global headwinds. The World Bank expects the economy to continue growing in the next years, based on sound economic management by the government, export diversification and commitment for reform,” he noted.

Darin highlighted that one key issue under discussion is the impact of US tariffs on Cambodian exports. “In Cambodia, the existing tariff rate on garment exports is about nineteen percent. I’m optimistic that it is manageable and competitive relative to other garment exporting countries as well. This relatively stable rate has allowed factories in Cambodia to keep running, hundreds of thousands of jobs intact and the country’s export earnings flowing,” he said.

He stressed that the policy priority for Cambodia is clear — to protect existing jobs while laying the foundation for a more competitive and diversified economy. While some short-term measures are in place to maintain stability, the government is focusing on deeper structural reforms over the longer term.

These reforms include upgrading technical and vocational education, improving logistics and energy systems, enhancing the investment climate and pushing industries up the value chain.

“Our young workforce is among Cambodia’s richest resources. The country’s public sector is forging robust partnerships with private industry in order to leverage this demographic boon for gainful employment,” Darin said. “By linking training to what real employers really need, by encouraging apprenticeships and through assisting small and medium businesses to embrace better technology, we can lift productivity and in turn lift wages.”

Darin expressed confidence in Cambodia’s overall economic trajectory, emphasising the importance of steady macroeconomic management and continued reform.

“Cambodia’s economic outlook remains positive. With steady macroeconomic management, continuing reform, plus enthusiastic balance and synergy among the public and private sectors, there are good prospects of fostering growth to attract new investments in order to bring more jobs for its people,” he said.

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