PHNOM PENH: As Cambodia confronts a new wave of global economic uncertainty — from volatile oil prices and trade disruptions to regional border pressures — economists at the Asian Development Bank (ADB) say the country is entering this period of instability from a stronger policy position than during previous crises.
During the April 10 launch of the Asian Development Outlook (ADO) April 2026, ADB officials stressed that while risks to growth remain significant, Cambodia’s stronger fiscal management, monetary stability and ongoing structural reforms have given the government more room to respond than in earlier downturns such as the Covid-19 pandemic or past commodity shocks.
The message from the bank was clear: the economy is under pressure, but Cambodia now has more tools at its disposal.
“We should also be aware of and recognise the important advantages that Cambodia has,” said Milan Thomas, ADB Cambodia resident country economist.
He said the government currently has “three kinds of tools at its disposal” — monetary policy, fiscal policy and structural policy — all of which are helping create resilience at a time of mounting uncertainty.
Stronger policy buffers
ADB’s latest outlook projects Cambodia’s economy to grow by 4.5% in 2026 under an early stabilisation scenario tied to easing tensions in the Middle East.
While lower than Cambodia’s long-term average, officials said the figure still reflects relative resilience in a difficult global environment.
Thomas said one of Cambodia’s biggest advantages lies in its monetary framework, particularly the high level of dollarisation in the economy.
While dollarisation is often debated by policymakers, he said it offers short-term protection during periods of global inflation and currency instability.
“Dollarisation can actually be somewhat helpful in the current crisis,” he said.
According to Thomas, the widespread use of the US dollar helps shield Cambodia from a dual shock of rising imported prices and rapid currency depreciation — a combination that has severely affected many emerging economies during previous global crises.
“It ensures that the economy does not have to worry about imported inflation on top of currency depreciation,” he said.
This monetary stability, he noted, provides Cambodia with a layer of protection against the inflationary pressures caused by global fuel and commodity price spikes.
Fiscal space creates room to act
Perhaps the most significant advantage highlighted by ADB is Cambodia’s fiscal space.
After years of relatively prudent debt management and post-pandemic fiscal consolidation, the government is seen as having sufficient room to intervene if conditions worsen.
Thomas said this is particularly important given the wide-ranging nature of the current shocks, which affect households, small businesses, tourism operators and manufacturers.
“Good fiscal management gives the government the breathing room to respond in a situation like this,” he said.
He pointed to the government’s response during the Covid-19 pandemic as a strong example.
During that period, Cambodia rolled out cash transfers and economic relief measures to support vulnerable households and affected businesses.
“Covid was still a big problem, but it would have been much bigger without that response,” Thomas said.
ADB officials suggested that the government now has the capacity to deploy similar targeted support if needed, particularly for low-income families, laid-off workers and sectors hit by rising costs.
Rapid support under discussion
The ADB announced that it is already in close dialogue with the Ministry of Economy and Finance to assess emerging risks and identify areas for urgent support.
Yasmin Siddiqi, ADB country director for Cambodia, said the institution is working alongside the government and other development partners to ensure that assistance can be mobilised quickly if the external shocks deepen.
“We are working very closely with the finance ministry to understand the areas where support may be required,” she said.
She added that ADB is also considering how to provide “rapid urgent support” to help manage what could become a broader economic shock.
The bank’s president had already announced an urgent assistance package for developing member countries facing spillover effects from the global crisis, she said.
“We are already in discussions to see how rapidly we can mobilise support,” Siddiqi added.
Reforms strengthen long-term resilience
Beyond short-term crisis response, ADB officials emphasised that Cambodia is better positioned today because of longer-term structural reforms.
These include public finance reforms, education sector improvements, investments in renewable energy and efforts to strengthen workforce productivity.
Thomas said such reforms are beginning to improve the economy’s ability to absorb shocks.
“This is a much longer conversation, but public finance reforms, education sector reforms, all these things are contributing to a more productive workforce,” he said.
ADB officials also pointed to Cambodia’s growing renewable energy capacity as another strategic advantage.
More than 60% of the country’s electricity now comes from renewable sources, reducing dependence on imported fuel for power generation.
This shift is increasingly important as the Middle East conflict continues to disrupt global energy markets.
Siddiqi said the expansion of solar power, hydropower and battery storage systems has helped strengthen the country’s resilience.
“This transition towards renewables is, in some ways, a safeguard measure,” she said.
Risks remain real
Despite the stronger policy position, ADB cautioned that Cambodia remains exposed to external shocks.
The bank has identified three main risks: border disruptions, global trade uncertainty and oil price spikes.
These factors could weigh on tourism, manufacturing costs, inflation and household purchasing power.
ADB’s economists warned that if all three shocks intensify simultaneously, growth could slow sharply and poverty could rise.
Still, officials said the country is in a better position than during previous crises because of the policy tools already in place.
“What we do see so far is the resilience of Cambodia’s economy,” Siddiqi said.
She praised the government’s early response measures, including fuel market oversight and public communication efforts aimed at reducing panic over energy prices.
“We commend the government for the efforts they are taking,” she said. - The Phnom Penh Post/ ANN
