Cambodia's Economic Activity Revives, World Bank Forecasts Growth Amid Export Rebound

The report forecasts a marginal improvement in economic growth, with a projected growth rate of 5.8% in 2024, up from 5.6% in 2023.

According to the latest Cambodia Economic Update released by the World Bank, Cambodia's economic activity showed signs of recovery in the first quarter of 2024, driven by a resurgence in services and goods exports, despite subdued domestic demand.

The report forecasts a marginal improvement in economic growth, with a projected growth rate of 5.8% in 2024, up from 5.6% in 2023. The growth trajectory is expected to strengthen further, reaching 6.1% in 2025 and 6.4% in 2026, propelled by the revival of garment, travel goods, and footwear exports, as well as a resurgence in tourism driving the ongoing recovery.

"To sustain economic growth, Cambodia needs to maintain macro-financial stability by restoring fiscal space and safeguarding its financial sector,” emphasized World Bank Country Manager for Cambodia, Maryam Salim. “Cambodia can also strengthen competitiveness by improving the business climate, streamlining trade procedures at borders, making the energy supply more reliable, and strengthening education."

The update highlights the positive trend in international tourist arrivals, which reached 84% of pre-pandemic levels in the first quarter. Additionally, exports of garments, travel goods, and footwear rebounded, with non-garment exports, particularly agricultural commodities, demonstrating resilience. The ASEAN region has emerged as Cambodia's second-largest export market after the United States. Furthermore, increased foreign investment in manufacturing and agriculture has contributed to the economic recovery.

Inflation declined to zero in March due to a deceleration in food prices, while the current account recorded an unprecedented surplus in 2023, attributed to a narrowing trade deficit and increased tourism receipts.

However, construction activity remains subdued as the property market correction persists, leading to a significant slowdown in domestic credit growth, which has weighed on private consumption and domestic revenue collection.

The report's special focus section examines opportunities to enhance Cambodia's education system to boost worker skills and productivity. Recommendations include increased investment in early childhood and primary education, improving teacher effectiveness, and ensuring equitable distribution of resources.

Overall, the Cambodia Economic Update underscores the resilience of Cambodia's economy amid challenges and outlines strategies to sustain and enhance economic growth in the coming years.