The International Monetary Fund has cut Cambodia’s 2026 growth forecast to 3.0%, citing surging energy costs, weaker tourism and remittances, slowing garment exports, and tighter financial conditions. Inflation is expected to stay elevated at 5.6% before easing in 2027, while risks to growth are skewed to the downside.
Economic outlook: sharp slowdown, modest recovery
Cambodia’s economy grew by 5.3% in 2025, supported by manufacturing exports, foreign direct investment, and infrastructure projects, but domestic demand remained weak amid a prolonged real estate correction. Growth is now projected to slow to 3.0% in 2026 and recover only gradually to 4.0% in 2027.
The IMF attributes the slowdown to multiple headwinds: higher energy prices, weaker tourism and remittance inflows, decelerating garment exports, subdued domestic demand, and tighter financial conditions. Border tensions with Thailand have also reduced land-based tourism and remittances and prompted the return of nearly one million migrant workers, adding pressure on the labor market and household incomes.
Inflation, which averaged 2.5% in 2025, rose sharply in early 2026 and is projected to average 5.6% in 2026 as higher energy costs feed through to broader prices. The current account deficit is expected to widen significantly, though resilient FDI and adequate foreign exchange reserves—around 7–8 months of imports—provide important buffers.
Downside risks and policy priorities
The IMF warns that risks to growth are tilted to the downside, including from renewed energy and trade disruptions, persistent scam-related activities, and a sharper real estate correction that could amplify banking sector losses. On the upside, planned fiscal stimulus could support activity, and stability in global commodity markets would help ease inflation.
Key policy recommendations include:
- Fiscal policy: Provide targeted, temporary support to vulnerable households while phasing out broad fuel subsidies; strengthen domestic revenue mobilization and public investment management; and operationalize fiscal rules and buffer funds to rebuild policy space.
- Monetary policy: Remain agile to evolving inflation and foreign-currency liquidity pressures; absorb excess riel liquidity if second-round price pressures broaden; and ensure any foreign-currency liquidity support is temporary, collateralized, and limited to solvent institutions.
- Financial sector: Prioritize balance-sheet repair, timely non-performing loan resolution, and stronger oversight of concentrated real estate and large-borrower exposures; finalize deposit protection and liquidation frameworks; and strengthen crisis-management tools.
- Financial integrity and anti-scam measures: Urgently address potential links between criminal activity and banks, close licensing gaps, and deepen understanding of how scam proceeds and human trafficking are laundered; advance and enforce a regulatory framework for virtual assets as part of broader anti-scam policies.
- Structural reforms: Focus on reforms that attract higher-quality FDI, deepen supplier linkages, upgrade skills, and strengthen technology transfer; improve governance, rule of law, and enforcement predictability; and invest in energy security and climate resilience.
Selected economic indicators (IMF projections)
| Indicator | 2025 | 2026 (proj.) | 2027 (proj.) |
|---|---|---|---|
| Real GDP growth (%) | 5.3 | 3.0 | 4.0 |
| Inflation, average (%) | 2.5 | 5.6 | 3.1 |
| Current account (% of GDP) | −3.7 | −8.7 | −7.8 |
| Public debt (% of GDP) | 25.5 | 25.1 | 25.2 |
| Gross official reserves (months of imports) | 8.9 | 7.7 | 7.1 |
Source: IMF Staff Report, 2026 Article IV Consultation with Cambodia.
