Cambodia

Economic activity continued to solidify in early 2025, driven largely by robust goods exports, a recovery in services exports (particularly tourism receipts), and stronger private consumption. Economic performance remains uneven across sectors, however. The formal sector, particularly manufacturing exports, remains strong. In contrast, activity in the informal sector (especially retail and informal services) has lagged, as a result of the recent sharp deceleration in domestic credit growth and the ongoing housing market correction.

The uneven recovery, rising inflation, and mounting household debt have also weighed on real household disposable incomes, especially for poorer households that are more reliant on agriculture and services. Externally, rising risks include challenges from heightened policy uncertainty and adverse shifts in trade policy.

In the decade before the pandemic, poverty rates declined by 1.6 percentage points a year, driven by rising labor (especially wage) earnings. The COVID-19 pandemic and hikes in global energy and food price contributed to increased poverty until 2023, when economic recovery and moderate inflation helped lower the poverty rate. Poverty rates have not fully returned to pre-pandemic levels, however, partly because of the incomplete economic recovery of tourism and construction.

Between June 2020 and March 2024, the government scaled up social assistance to poor and vulnerable households, buffering income losses caused by the pandemic. This assistance prevented hundreds of thousands of Cambodians from falling into poverty and eased the depth of poverty for those already struggling. In April 2024, the government introduced the Family Package, which provides social assistance to poor and vulnerable households on a regular basis.

Cambodia has improved health outcomes, early childhood development, and primary education in rural areas. Between 2000 and 2021, infant mortality rate reduced from 95 deaths to 12 deaths per 1,000 live births; and under-five mortality rate reduced from 124 to 16 deaths per 1,000 births. Despite this progress, human capital indicators lag other lower-middle-income countries’. In 2020, children born in Cambodia were expected to be only 49 percent as productive as adults as they could have been had they enjoyed full-quality education, good health, and proper nutrition during childhood.

Cambodia has increased school enrollment rates, built new schools, and improved access to learning, But many students are not acquiring the foundational skills in literacy and numeracy that are critical for future learning and a dynamic workforce. The need to harness and develop the vast untapped potential of these young learners is urgent.

Key reforms are needed if Cambodia is to sustain inclusive growth, foster competitiveness, sustainably manage its natural resource wealth, and improve access to and the quality of public services. The infrastructure gap is large; greater connectivity and investments in rural and urban infrastructure are needed. Further diversification of the economy will require fostering entrepreneurship, expanding the use of technology, and building new skills to address emerging labor market needs. Accountable and responsive public institutions will also be crucial. Boosting investments in human capital will be critical to achieving Cambodia’s ambitious goal of reaching high-income status by 2050.

The new  World Bank Group Country Partnership Framework (CPF) for Cambodia FY25–FY29  focuses on three high-level objectives, all of them aligned with the government’s priorities, as articulated in the Pentagonal Strategy:

• Improving human capital outcomes, especially in basic education

• Increasing competitiveness by transforming the country’s low-skill and low-value-added economic growth model into one that provides better-quality jobs and higher per capita income while avoiding emissions-intensive growth

• Safeguarding livability by building resilience to crises and addressing the declining quality of natural resources and the impacts of a changing climate.

The cross-cutting theme of support for governance and institutional strengthening will focus on accountability, participation, and transparency. Various interventions under the CPF program will address gender and inclusion, climate adaptation and resilience, and the digital transition.

The knowledge agenda represents a significant part of the World Bank’s engagement in Cambodia. Bank research—on macroeconomics and competitiveness, public financial management, digital development, gender and social inclusion, financial inclusion, poverty, access to quality health and nutrition services, education, power grid strengthening, environmental sustainability, and social protection and jobs—improves understanding of the development challenges Cambodia faces and fosters dialogue on development policy issues with a broad range of stakeholders.