World Bank warns 1.1m Cambodians risk poverty

PHNOM PENH – Cambodia could see more than a million people fall back into poverty if fuel prices continue to climb, the World Bank has warned, as it forecasts slower growth and urges urgent reforms to prepare for an ageing population.

In its latest economic update, the Bank said a 60 per cent rise in fuel costs could push the poverty rate up by six percentage points. Higher transport and production expenses would ripple through supply chains, driving up the price of food and daily essentials.

The warning comes as the country grapples with weaker remittances, rising living costs and shrinking household demand. Growth is expected to slow to 3.9 per cent this year, down from stronger performances in recent years.

One of the sharpest shocks followed the return of nearly a million Cambodian migrant workers from Thailand in 2025, after border tensions. For years, remittances had been a lifeline for rural families, covering school fees, medical bills and food. But inflows have dropped to 3.6 per cent of GDP, down from an average of 6 per cent between 2019 and 2024.

Farmers are among the most exposed. Fuel, fertiliser and pesticides already make up a large share of production costs. Rising energy prices threaten to squeeze margins further, weaken rural incomes and heighten food insecurity.

Yet the report also points to resilience. Foreign direct investment reached $5.1 billion in 2025, a 15 per cent rise, with money flowing into electronics, household appliances, tyres and renewable energy. The labour market absorbed around 800,000 jobs last year, including 400,000 in the formal sector, easing the impact of returning workers.

Still, the Bank stresses that creating jobs alone is not enough. Many workers remain in low‑productivity roles, and a mismatch persists between skills demanded by employers and those available. Domestic firms struggle with high logistics costs and limited access to finance, leaving foreign‑invested industries to dominate.

Beyond today’s pressures, Cambodia faces a demographic turning point. Its working‑age population is expected to peak around 2043, leaving less than two decades to boost productivity and strengthen human capital before ageing begins to weigh on growth.

The Bank urges a dual response: protect vulnerable households now, while investing in education, healthcare and workforce skills for the long term. Closing human‑capital gaps could lift future earnings by nearly 70 per cent, it says.

Whether Cambodia achieves its Vision 2050 goal of becoming a high‑income economy may depend on how effectively it uses the years ahead to transform a still‑young workforce into a more productive one before its demographic dividend fades.

-2026-07-22