Cambodia’s Economic Activity Picks Up; Growth to Reach 5.8% in 2024

The World Bank's Cambodia Economic Update, released today, indicates a pickup in Cambodia's economic activity during the first quarter of 2024. This growth is primarily driven by a revival of services and goods exports, despite subdued domestic demand.

According to the report, economic growth is expected to improve marginally to 5.8% in 2024, up from 5.6% in 2023. This growth trajectory is projected to strengthen further, reaching 6.1% in 2025 and 6.4% in 2026, driven by the revival in garment, travel goods, and footwear exports, as well as the recovery of the tourism sector.

Maryam Salim, World Bank Country Manager for Cambodia, emphasized the importance of maintaining macro-financial stability and strengthening competitiveness to sustain economic growth. Key recommendations include restoring fiscal space, safeguarding the financial sector, improving the business climate, streamlining trade procedures, ensuring reliable energy supply, and enhancing education.

The report highlights positive signs such as the improvement in international tourist arrivals, reaching 84% of pre-pandemic levels in the first quarter. Exports of garments, travel goods, and footwear rebounded, with the ASEAN region emerging as Cambodia's second largest export market after the United States. Rising foreign investment in manufacturing and agriculture also contributed to the ongoing recovery.

Inflation declined to zero in March, driven by decelerating food prices, while the current account recorded an unprecedented surplus in 2023 due to a narrowed trade deficit and increased tourism receipts.

However, construction activity remains subdued, reflecting a correction in the property market. This slowdown has led to a significant deceleration in domestic credit growth, impacting private consumption and domestic revenue collection.

The report also includes a special focus section on strengthening Cambodia's education system to increase worker skills and productivity. Recommendations include increased investment in early childhood and primary education, enhancing teacher effectiveness, and ensuring equitable distribution of resources.

The World Bank's Cambodia Economic Update provides valuable insights and recommendations for policymakers to navigate challenges and capitalize on opportunities for sustained economic growth.