Cambodia–Thailand border conflict threatens 2026 growth

Cambodia’s economy faces mounting pressure as the fallout from last year’s border clashes with Thailand continues to reverberate. Prolonged closures at key crossings have disrupted trade, labour flows and tourism, prompting warnings from regional analysts that growth could slip and inflation rise in 2026.

The ASEAN+3 Macroeconomic Research Office (AMRO) reported that the conflict, which left dozens dead and displaced thousands, has already forced some 900,000 Cambodian migrant workers to return home. Remittances—worth $2 billion in 2024 and accounting for more than five percent of GDP—are now at risk of collapsing, with AMRO predicting a potential 37 percent decline if workers remain unable to return to Thailand.

Tourism, another pillar of Cambodia’s economy, has also taken a hit. Thai visitors, who make up nearly a third of arrivals, fell sharply amid tighter border controls, while international travellers were deterred by reputational concerns linked to online scams.

The report warns that tourism could shrink by more than 40 percent if tensions persist.

Trade has suffered too, with Cambodia heavily reliant on Thai imports of fuel, vehicles and food. Internet connectivity, which depends on Thai infrastructure, has also been affected.

Analysts caution that foreign investment could stall, particularly for firms operating under the “Thailand +1” strategy that relies on cross-border supply chains.

The Cambodian government insists growth will hold at five percent this year, citing resilient garment exports and efforts to diversify investment. Yet AMRO warns that if closures extend into late 2026, inflation could climb above three percent and GDP growth fall below four percent.

Beyond economics, the dispute has fuelled nationalist sentiment, with campaigns to boycott Thai goods gaining traction. Analysts say the 2025 clashes may mark a turning point in bilateral relations, reshaping commerce and labour flows for years to come.

Policy experts urge Cambodia to cushion the blow by supporting returning workers, restoring traveller confidence, and diversifying trade routes through Vietnam and Sihanoukville. Whether these measures can offset the shockwaves of the border conflict remains uncertain, but the stakes for Cambodia’s 2026 outlook are clear.

-2026-02-04