Numerous buildings under construction in Phnom Penh. - Supplied
PHNOM PENH: The negative impacts of US tariffs and the effects of the armed conflict along the Thai border have led to several challenges for Cambodia’s economic trajectory. The Ministry of Economy and Finance has reduced its economic growth forecast for 2025 to just 5.0%, down from the original estimate of 6.3%.
A report titled “Results of the First-Half Budget Implementation and Evaluation of the Financial Law Implementation for 2025”, published by the ministry last weekend, stated that the global economic environment remains surrounded by uncertainty and is evolving rapidly.
The global outlook is currently in a period of multiple crises, including escalating geopolitical tensions and the rise of protectionist policies by major powers — particularly trade wars. These protectionist policies have reached a new turning point, further intensifying global cooperation challenges and creating negative economic pressures.
The report noted that Cambodia's macroeconomic conditions are also experiencing changes.
Before the US government imposed reciprocal tariffs and before the land border closure between Cambodia and Thailand, Cambodia’s economy was projected to grow at around 6.3%.
This growth was expected to be driven by continued resilience of export-related service sectors (including both garment and non-garment manufacturing), a steadily rising tourism sector and stable growth within the agricultural sector.
However, in April 2025, the economic outlook within the framework of public finance for the medium term (2026–2028) revised the 2025 growth estimate downward to 5.2% due to anticipated negative effects from retaliatory tariffs on export-related services.
As of mid-2025, the situation had deteriorated further beyond expectations, with tariffs implemented at a 36% rate (later reduced to 19%) and the continued closure of the Cambodia–Thailand land border, which is expected to persist until the end of the year.
“Based on consensus and macroeconomic indicators, as of the first half of 2025, Cambodia’s economic growth is projected to decline further to just 5.0%. This decline is partly due to the land border closures hampering production activities that rely on the transport of raw materials and/or exports, as well as disruptions in tourism flows, especially international tourists who travel via land checkpoints,” it said.
“Another factor is the imposition of retaliatory tariffs at 36% (currently 19%), set to take effect starting August 2025, which is expected to negatively impact US market orders in the fourth quarter of 2025,” it added.
The ministry explained that the industrial sector is expected to grow at 7.1%, slightly below previous expectations, due to slower growth in garment and non-garment sub-sectors, while the construction sub-sector is recovering at a slower pace.
The services sector is projected to grow by 3.8%, impacted by the Cambodia–Thailand land border closure which affects supportive sub-sectors like hospitality and food services, as well as transportation — which is affected both by the border closure and the US tariffs.
The agricultural sector is forecasted to grow at 0.9%, supported by crop and fisheries sub-sectors, while the livestock sub-sector is expected to gradually recover. - The Phnom Penh Post/ANN
