World Bank warns Cambodia’s growth hit by multiple shocks

Cambodia’s economy is expected to lose momentum next year as a mix of domestic pressures and external headwinds weighs on activity, according to the World Bank’s latest assessment. The December 2025 Cambodia Economic Update forecasts growth of 4.8 percent in 2025, down from 6 percent this year.

The slowdown, the Bank says, is being driven by three major factors: a cooling property market, the escalating border dispute with Thailand, and a sharp rise in US tariffs. The property downturn has weakened domestic demand and slowed construction, while the conflict along the Thai border has disrupted labour markets and deterred tourism at a critical moment for the sector.

Adding to the strain, the United States imposed a 19 percent tariff on all Cambodian imports on 1 August, a move that has hit exporters and increased uncertainty for manufacturers.

“Cambodia is navigating a challenging period amid combined domestic and external shocks,” said Tania Meyer, the World Bank’s Country Manager for Cambodia. She noted that the country still has “strong buffers”, but warned that targeted reforms will be essential to help the economy absorb the pressure.

Meyer highlighted the need to protect vulnerable households — including returning workers affected by the border tensions — while also improving the business environment. Supporting informal enterprises and easing the path to formalisation, she said, would help create better‑quality jobs and level the playing field for small firms.

Despite the headwinds, the report points to several areas of resilience. Cambodia’s international reserves remain robust, covering around 7.5 months of imports, and public debt is relatively low at 26 percent of GDP. Inflation has stayed contained at an average of 2.7 percent this year.

Foreign direct investment has also shown surprising strength. Inflows reached $2.3 billion in the first half of 2025 — a 28.4 percent year‑on‑year increase — helping to offset some of the external imbalances created by weaker trade and rising tariffs.

The World Bank’s message is clear: Cambodia is not facing a crisis, but it is entering a more fragile period. With geopolitical tensions simmering and global demand uncertain, policymakers will need to balance short‑term support with longer‑term reforms to keep growth on track.

-2025-12-15