Skip to Main Navigation

Overview

Over the two decades before the COVID-19 pandemic, Cambodia underwent a significant transition, reaching lower middle-income status in 2015 and expressing the aspiration of attaining upper middle-income status by 2030. Driven by garment exports and tourism, Cambodia’s economy sustained an average annual growth rate of 7.7 percent between 1998 and 2019, making it one of the fastest-growing economies in the world.

In 2020, however, the crisis unleashed by COVID-19 negatively affected three main sectors of Cambodia’s economy, tourism, manufacturing exports, and construction, that contributed more than 70 percent of the country’s economic growth and provided 39 percent of its total paid employment in 2019. The economy in 2020 registered its worst performance since 1994, contracting by 3.1 percent.

Cambodia has adapted to COVID-19. Real growth is estimated to have reached 3 percent in 2021. The authorities have relaxed travel restrictions in an effort to sustain business activity. COVID-19 infections, which receded in the fourth quarter of 2021, have resurged since February 2022, caused primarily by the rapid spread of the Omicron variant. About 83 percent of the population have received two doses of COVID vaccines. Amid eased mobility restrictions, economic recovery is underpinned by a strong rebound in manufacturing, especially the garment, travel goods, footwear, and bicycle industries, and agriculture. Meanwhile, the recovery of the service sector and, especially, tourism -- an important source of employment -- remains sluggish.

A resurgence of new variants could disrupt economic recovery, despite continued strong external demand conditions. Since Cambodia is an energy and food net importer, rising energy and food prices due to the war in Ukraine could dampen consumer confidence and lower incomes, increasing poverty.

Cambodia has recently redefined the poverty line, using the most recent Cambodia Socio-Economic Survey for 2019/20, based on cost-of-basic need, and a common basket approach. The national poverty line in Cambodia is now riel 10,951 or is equivalent to US$2.7 (market exchange rate) per person per day. Under the new poverty line, about 18 percent of the population is identified as poor. Poverty rates vary considerably by area. The poverty rate is the lowest in Phnom Penh (4.2 percent), other urban areas (12.6 percent), and the highest in rural areas (22.8 percent).

Over the period 2009-2019/20, poverty rates declined by 1.6 percentage points per year, driven substantially by rising labor (especially wage) earnings. However, the COVID-19 pandemic caused more rising unemployment and increased poverty and inequality. The scale up of social assistance to poor and vulnerable households, launched in June 2020, has moderated income losses due to the pandemic. The increase in the poverty rate in 2020 is projected to have been limited to an increase of 2.8 percentage points.

Poverty remains higher than pre-pandemic. The results of a High Frequency Phone Survey of Households show that employment has yet to return to pre-pandemic levels. The negative impacts of the pandemic on non-farm family businesses remain substantial, caused mainly by weak consumer demand. Nearly half of households report declines in income between December 2020 and March 2021. This suggests that a proportion of households that are negatively affected by COVID-19 continue to suffer from income loss, which could lead to an increase of poverty.

Cambodia has made considerable strides in improving health outcomes, early childhood development, and primary education in rural areas. Life expectancy at birth has risen from 58 years in 2000 to 70 years in 2020. The maternal mortality ratio per 100,000 live births has decreased from 351 in 2005 to 160 in 2017; the under-five mortality rate has decreased from 106.3 per 1,000 live births in 2000 to 26.6 per 1,000 in 2019; and the infant mortality rate has fallen from 78 per 1,000 live births in 2000 to 22.8 per 1,000 in 2019. Despite the progress in health and education outcomes, human capital indicators lag other lower middle-income countries. In 2020, a child born in Cambodia would be expected to be only 49 percent as productive when grown as she or he could be if she or he enjoyed full quality education, good health, and proper nutrition during childhood. An estimated one in three children under the age of five suffer from stunting and only 36 percent of children between three and five years old are enrolled in early education. In 2021, net enrollment rates for primary, lower secondary, and upper secondary sub-sectors reached 91.9 percent, 60.7 percent, and 32.2 percent, respectively. The net preprimary education enrollment rate for five-year-olds rose from 24.6 percent in 2004 to 61.08 percent in 2021. As of 2020, 15 percent of Cambodia’s population (2.5 million people) did not have access to improved water, and 23 percent (3.8 million people) did not have access to improved sanitation.

Key reforms are needed for Cambodia to sustain pro-poor growth, foster competitiveness, sustainably manage natural resource wealth, and improve access to and quality of public services. Cambodia continues to have a serious infrastructure gap and would benefit from greater connectivity and investments in rural and urban infrastructure. 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 critical.  The quality of human capital will be of utmost importance to achieve Cambodia’s ambitious goal of reaching middle-income status by 2030.

Last Updated: Mar 29, 2022

Image

number of poor Cambodians covered by Health Equity Fund schemes

LENDING

Cambodia: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments
Image
PHOTO GALLERY
More Photos

In Depth

Additional Resources

Country Office Contacts

Phnom Penh
Exchange Square Building, No. 19-20, Street 106, Sangkat Wat Phnom, Khan Daun Penh, Phnom Penh
Tel: +855 23 261300
Fax: + 855 23 261301-2
Washington
1818 H Street NW, Washington, DC 20433 Tel: +1 202-473-4709