While this reflects a slight improvement from the firm’s assessment three months earlier—when growth was expected to hover closer to 3 per cent—the economic landscape remains challenging, it noted.
The country continues to grapple with the repercussions of ongoing regional tensions, reputational impacts linked to scam centres and deep-rooted strains in the real estate market, it said.
Despite the Thai border conflict, returning migrant workers and ongoing stress in the property sector, Cambodia is showing a blend of resilience and vulnerability this year as strong domestic consumption and manufacturing exports continue to offset significant shocks arising out of the setbacks, the report noted.
Over 900,000 Cambodians are estimated to have left Thailand due to the conflict, placing remittances under severe strain. With remittances valued at approximately $1.5 billion annually, Mekong Strategic Capital expects around $1.125 billion could be lost, resulting in a short-term gross domestic product (GDP) impact of roughly 1.8 per cent.
Absorbing these workers into the domestic economy will require urgent policy interventions and job-creation measures.
The government’s ongoing crackdown on scam centres is expected to bring short-term economic costs but substantial long-term gains. The report estimates the near-term impact at between 1 and 2 per cent of GDP, largely due to reductions in operational spending linked to the illicit industry.
Despite these headwinds, Cambodia’s domestic economy has shown surprising resilience. Value-added tax and excise collections grew, while manufacturing exports performed strongly despite uncertainty surrounding potential US tariffs.
On the fiscal front, the firm argues that Cambodia retains significant capacity to borrow and should deploy targeted stimulus to counteract current economic pressures.
The report also highlights Cambodia’s long-term advantages, particularly its demographic profile. The working-age population is projected to expand steadily through 2050, in stark contrast to declines expected in China, Thailand and Vietnam. This demographic dividend is expected to underpin continued growth in consumption, labour supply and manufacturing competitiveness.
ALCHEMPro News Desk (DS)
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