Cambodia growth projected at 4.8% in 2025 as shocks weigh: World Bank

The December 2025 Cambodia Economic Update, titled ‘Coping with Shocks’, highlighted pressures from a softening property sector, border disruptions, and new trade restrictions. Despite the slowdown, Cambodia enters this period with solid macroeconomic buffers. International reserves remain strong, covering about 7.5 months of imports, while public debt stands at a low 26 per cent of gross domestic product (GDP). Inflation is expected to stay contained at an average of 2.7 per cent in 2025.

Foreign direct investment (FDI) inflows rose sharply in the first half (H1) of 2025, reaching $2.3 billion, up 28.4 per cent year-on-year (YoY), helping to offset external imbalances. However, government revenue growth is likely to remain subdued amid weaker consumption, and the current account deficit is projected to widen.

To mitigate near-term risks, the World Bank recommended emergency cash transfers and training and job placement programmes for returned migrants to support vulnerable households and sustain domestic demand. Over the medium term, reforms should focus on reducing business costs, improving access to finance for small enterprises, and streamlining trade and logistics through digitisation.

A special chapter on the informal economy underscored its critical role, noting that informal businesses account for around 90 per cent of enterprises and 88 per cent of employment in Cambodia. While informal firms are on average 2.6 times less productive than formal ones, the sector is highly diverse, ranging from survival enterprises to high-performing firms.

The report urged expanded social protection for vulnerable informal workers, targeted support to help viable informal firms upgrade productivity, and incentives to encourage high-performing informal businesses to formalise through lower registration costs, expanded digital services, and clearer policy incentives.

“Cambodia is navigating a challenging period amid combined domestic and external shocks,” said Tania Meyer, World Bank country manager for Cambodia. “Strong buffers and targeted reforms can help the country withstand these economic pressures. Protecting vulnerable households, including returnees, remains essential. At the same time, improving the business environment, supporting informal enterprises and easing formalisation are critical to unlock growth, level the playing field, and create better-quality jobs.”

ALCHEMPro News Desk (SG)