Transport, logistics capacity, energy supply impose costs
PHNOM PENH, November 22, 2023 — Cambodia’s economic growth is projected to reach 5.4% in 2023, marginally down from 5.5% forecast in May, and pick up to 5.8% in 2024 and 6.1% in 2025, on anticipated increases in infrastructure investment and benefits from regional trade agreements, the World Bank said in its semi-annual outlook for the country.
This year, a combination of external pressures and structural shortcomings that are weighing on growth, despite an initial recovery in tourism and other services, according to the World Bank’s Cambodia Economic Update: Accelerating Structural Reforms. If structural reforms accompany infrastructure investments and trade opportunities, growth should continue to accelerate in the medium to long term. Cambodia’s economy expanded by 5.2% in 2022.
“To sustain economic growth, Cambodia needs to support the private sector as the engine of growth, and this can be achieved by prompt actions to improve public sector performance,” said World Bank Country Manager for Cambodia Maryam Salim. “Maintaining financial stability is also a priority and more efforts are needed to restore fiscal space.”
Despite major investments in public infrastructure, the country’s limited transport and logistics capacity and unreliable energy supply continue to impose high costs on business and consumers. In the short term, overlapping negative shocks from the pandemic, Russia’s invasion of Ukraine, and high international interest rates are expected to continue to constrain growth.
Tourism is crucial to Cambodia’s economy, and while international tourists are returning, receipts at major destinations are well below pre-pandemic levels. Investment in merchandise manufacturing, including of garments, and exports of finished goods have both weakened, reflecting lower global demand. As a result, manufacturing jobs have dropped by 5%, prompting authorities to provide financial support to laid-off workers.
Looking ahead, economic growth could further be affected by weakening global demand or renewed oil and food price shocks. Domestically, rising household debt and domestic credit in the real estate sector remain risks.
A special focus section outlines structural reforms that could help Cambodia foster a more sustainable, productivity-led pattern of growth. These include improving the business environment to boost productivity and competitiveness, upgrading infrastructure and connectivity, and upgrading workforce skills.
The Cambodia Economic Update focuses on short- and medium-term macroeconomic developments and is published twice a year.