Busy street vendors in downtown Phnom Penh. - Photo: The Phnom Penh Post file
PHNOM PENH: The International Monetary Fund (IMF) has joined the Ministry of Economy and Finance and downgraded its growth expectations for Cambodia’s economy in 2025.
On Tuesday (Sept 2), the IMF stated that following a consultation mission led by Kenichiro Kashiwase, held with the Cambodian authorities, private sector representatives and developing partners in Cambodia from Aug 20 to Sept 2, it forecast Cambodia’s real gross domestic product (GDP) growth in 2025 at 4.8 per cent, down from 6 per cent in 2024.
It attributed the decline to international trade policy uncertainties, border disputes with Thailand, and issues related to remittance inflows from overseas workers.
The IMF suggested that sustaining Cambodia’s economic development and resilience will require accelerating structural reforms that build productive capacity and diversify growth drivers.
“With Cambodia’s impending graduation from Least Developed Country status by end-2029, there is a renewed urgency to improve productivity and competitiveness,” it said.
“Priorities should include enhancing the business environment by strengthening governance and anti-corruption efforts, improving the rule of law, property rights and access to information, strengthening social safety nets, and investing in human capital to support employment, attract foreign direct investment, and facilitate a shift toward higher value-added industries,” it noted.
In a statement, Kenichiro noted that Cambodia’s economy performed strongly in 2024, with real GDP growth reaching 6 per cent, supported by a robust rebound in garment and agricultural exports, and a recovery in tourism. This momentum continued in early 2025.
However, growth is expected to slow as trade tensions and the border dispute with Thailand — despite the recent ceasefire — begin to weigh on external demand, tourism and remittance inflows. Inflation is expected to rise moderately to about 2.8 percent but remains contained.
Kenichiro explained that risks to the outlook are heavily tilted to the downside.
A sharper-than-expected escalation in trade and border tensions could further weaken exports, tourism and growth.
Domestically, financial sector vulnerabilities are a key concern. High private sector debt and rising NPLs, which have surpassed 7 per cent — particularly in the tourism and real estate sectors — could lead to corporate and household financial stress and weigh on the recovery.
On the upside, successful reintegration of returning workers into the domestic labour force could support consumption and mitigate some of the adverse growth effects.
“In this challenging environment, fiscal policy should provide temporary and targeted support to vulnerable households and displaced workers, while maintaining overall fiscal discipline. Over the medium term, a gradual, growth-friendly fiscal consolidation is essential to rebuild buffers and ensure long-term sustainability of public debt,” said the IMF.
“A credible revenue mobilisation strategy is a central priority. This should include reducing extensive tax exemptions and strengthening tax compliance to create space for critical spending on social protection, education, health and infrastructure,” it added.
At the end of August, the finance ministry revised its projection for Cambodia’s economic growth in 2025 to 5.0 per cent, down from the 6.3 per cent forecast earlier this year. - The Phnom Penh Post/ANN
