IMF Cuts Cambodia Growth Forecast Amid Rising Risks

Kenichiro Kashiwase, IMF, photo Kiripost

Cambodia’s economic outlook for 2025 has dimmed, with the International Monetary Fund revising its growth forecast down to 4.8 percent from last year’s 6 percent, citing trade frictions, border tensions and mounting financial vulnerabilities.

The downgrade follows an IMF mission to Phnom Penh, where officials met with government leaders, the National Bank of Cambodia (NBC), and private sector representatives. While Cambodia saw a strong rebound in 2024—driven by garment exports, agriculture and tourism—the momentum has faltered. The border dispute with Thailand and global trade uncertainty are now weighing on remittances and visitor numbers.

“Border tensions are an emerging risk,” said IMF mission chief Kenichiro Kashiwase. “Reductions in remittance inflows and tourism earnings are already factored into our revised projections.”

Cambodia’s deft diplomacy helped soften the blow, negotiating a reduction in proposed tariffs from 49 to 19 percent. Yet exporters are still expected to absorb much of the cost, potentially denting corporate income and investment.

Domestically, the financial sector is showing signs of strain. Non-performing loans have surged past 7 percent, particularly in real estate and tourism-linked industries. The NBC has responded with tighter supervision and action plans, but the IMF warns that high private debt could dampen consumption and trigger broader stress.

To navigate the turbulence, the IMF recommends targeted fiscal support for affected households and firms, alongside gradual fiscal consolidation to preserve long-term stability. Structural reforms—especially in governance, property rights and anti-corruption—are deemed essential as Cambodia prepares to graduate from Least Developed Country status by 2029.

“Tariff relief is not a reason to pause,” Kashiwase said. “Cambodia must push ahead with reforms to attract investment and diversify growth.”

Tourism and real estate remain the most exposed sectors, with ripple effects likely to hit indebted families. The challenge now is to balance short-term cushioning with long-term resilience—before external shocks become internal crises.

-2025-09-30