Cambodia 2025-2026: Resilient growth but persistent challenges

The latest Asian Development Outlook (ADO), published in September 2025 by the Asian Development Bank (ADB), paints a nuanced picture of Cambodia's economic trajectory, oscillating between notable resilience and growing risks that require vigilance and adaptation.

While the first half of 2025 was marked by solid growth, the second half promises to be more uncertain, due to regional tensions and an unstable global economic environment.

Solid but slowing economic growth

In the first half of 2025, Cambodia recorded robust growth of 5%, driven by dynamic domestic demand and a vigorous recovery in both public and private investment.

Private consumption strengthened, supported by increased household mobility and diversification of spending, while investment in construction and industrial equipment rose sharply.

Exports, particularly in the ready-to-wear textile sector, benefited from the anticipation of US tariff hikes, giving a temporary boost to the trade balance.

However, the ADB report anticipates a slowdown in the second half of the year due to border tensions with Thailand and the repercussions of US tariffs, which are likely to harm the competitiveness of Cambodian exports. Growth in the manufacturing sector, particularly excluding textiles, is expanding at a promising pace with the development of electronics and furniture, signs of a welcome industrial diversification.

Controlled inflation and accommodating monetary policy

Inflation in Cambodia fell significantly in 2025, with an estimated average annual rate of 3.3%, thanks to the fall in food prices and the stabilisation of the riel exchange rate.

This moderating trend has enabled the Central Bank to maintain an accommodating key rate of 1.5%, thereby supporting economic growth while ensuring price stability, despite persistent pressure on electricity and healthcare costs.

Infrastructure: a constrained lever for growth

Infrastructure development remains a key area for sustaining growth and promoting regional integration in Cambodia. The government is stepping up its efforts in road, water and energy projects, partly financed by concessional loans and multilateral aid.

However, the report points out that limited project implementation and management capacities are slowing down the implementation of public investments, thereby slowing down the maximum expected impact on productivity and economic connectivity.

Social situation and government initiatives

On the social front, the Cambodian authorities have pursued their policies to reduce poverty and improve well-being, with a particular focus on food aid programmes, conditional cash transfers, and the promotion of health and education.

The budget deficit, moderate at 2.8% of GDP, reflects a prudent fiscal policy that balances an increase in social spending with the need to maintain public debt sustainability.

The ODA highlights progressive tax reforms, in particular the increased digitalisation of collection processes and the stepped-up fight against tax leakage, which are helping to boost public revenue. At the same time, measures are being taken to improve the efficiency of spending, notably by reforming public procurement, with the aim of optimising the use of limited resources.

Environmental challenges and sustainable development

Environmental issues are at the heart of concerns, notably with the temporary freezing of controversial mining projects for safety and environmental reasons, illustrating the desire for more sustainable development.

Cambodia remains exposed to the risks associated with climatic hazards, particularly during the monsoon season, aggravated by deforestation and increasing pollution.

The report also highlights the need to reconcile economic growth and environmental protection in order to ensure inclusive and resilient growth in the long term. Initiatives to promote renewable energies and the sustainable management of natural resources are beginning to emerge, encouraged by the technical and financial support of international partners such as ADB.

Future prospects

Cambodia enters the second half of 2025 with real economic potential, but also a range of internal and external challenges. Future success will depend on the ability of decision-makers to strengthen the business climate, accelerate the absorption of public investment, and consolidate structural reforms. Integration within ASEAN, particularly with the strengthening of regional trade, offers stimulating opportunities to diversify the economy and attract strategic investment funds.

More than ever, the resilience of the Cambodian economy depends on a subtle balance between rigorous macroeconomic management, targeted social progress and a strong commitment to sustainable development.