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.