ADB Cuts Cambodia's 2026 Growth Forecast to 3.9%, Inflation Set to Accelerate Sharply
The Asian Development Bank (ADB) has trimmed its outlook for Cambodia's economy. In its Asian Development Outlook released Wednesday, the bank now projects growth of 3.9% for 2026, down from 4.1% forecast in July and 4.5% in April — a 0.6 point cut in five months that reflects how deep the tourism slowdown has run.
Tourism, long a pillar of the economy and one of the kingdom's main sources of jobs and foreign currency, is now dragging growth down. International arrivals fell 47.9% year on year in the first half of 2026, to 1.8 million. The ADB points to "weaker-than-expected activity in tourism and related services" as the main driver of the downgrade. The slump ripples through hotels, restaurants and transport — sectors that employ large numbers of workers, particularly in Siem Reap and Sihanoukville.
Manufacturing is offsetting some of the damage. Garment exports rose 6.3% in the first half of the year, to $8 billion, while non-garment manufactured exports surged 38.4%, to $6.7 billion — evidence that the economy's diversification drive is gaining ground. Much of that growth is coming from electronics and consumer goods, segments the government is trying to build up to reduce the country's reliance on garments alone.
Inflation on the rise
Prices are the second concern. The ADB sharply raised its inflation forecast, to 4.7% for 2026, up from 2.5% previously, citing higher global oil prices and rising import costs. Inflation climbed from 2.6% in February to a peak of 7.2% in May before easing to 5.5% in July.
For 2027, the bank expects growth to accelerate to 4.7%, supported by resilient manufacturing, export diversification and continued foreign direct investment. Inflation, meanwhile, is projected to ease to 2.8%, helped by fuel tax relief measures and a broadly stable riel.
"Cambodia's economy continues to demonstrate resilience," said Yasmin Siddiqi. She noted that strong manufacturing exports and steady investment inflows are helping offset the difficulties in tourism, while calling for continued efforts to diversify the economy and support vulnerable households.
On the fiscal side, the ADB expects the government to keep spending on infrastructure, human capital and social protection through its Comprehensive Intervention Program. The fiscal deficit, after narrowing to around 1% of GDP, is expected to widen again in 2026 as that spending rises while revenue growth slows in step with the broader economic slowdown.
The bank still sees risks tilted to the downside. Persistent geopolitical uncertainty and the threat of El Niño-related weather disruptions in late 2026 and early 2027 could weigh on agricultural output and rural incomes. The ADB also notes that Cambodia's heavy reliance on imported fuel and other essential goods leaves the economy exposed to swings in global commodity prices and international shipping costs.
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