Cambodia: growth slumps to 3% in 2026 as the IMF points to the energy shock

Cambodia is one of the Asian economies hit hardest by the surge in energy prices. In its October Regional Economic Outlook, the IMF cuts its 2026 growth forecast for the country to 3%, down from 5.3% in 2025. The wider region is holding up.

Cambodia is slowing sharply in 2026. According to the IMF, growth in the kingdom would fall to 3%, after 5.3% in 2025. That is one point below the April forecast. The rebound expected in 2027, at 4%, has also been trimmed by 0.7 point. Cambodia is among the countries most exposed to higher oil and fertilizer prices.

A slowdown that stands out in the region

The contrast is clear. Asia as a whole is expected to grow 4.8% in 2026, 0.4 point more than in April. ASEAN stands at 4.9%. Vietnam reaches 8.4%, Malaysia 5.2% and Indonesia 5.1%.

The Fund explains the gap with three factors: the energy shock from the Middle East conflict, which began in February; the artificial intelligence boom; and the reshaping of global trade. Economies tied to semiconductors are benefiting. Those with neither this technology windfall nor large financial cushions are paying the price.

Fuel, fertilizer, inflation

Cambodia falls into the second group. The IMF lists the kingdom among the farm-heavy economies where higher energy and fertilizer prices have raised production costs, weakened yields and weighed on output.

Inflation is following. Cambodia ranks, alongside Fiji, Mongolia, Nepal and Sri Lanka, among the countries where prices have risen fastest. In many of them, core inflation has also accelerated markedly. Low-income households are hit first, because energy and food take up a large share of their budgets.

Support that comes at a cost

Phnom Penh has responded, like its neighbors. The kingdom cut taxes and duties on fuel. It also paid out cash transfers and cost-of-living top-ups to households.

These measures soften the blow. They also strain public finances, especially in low-income countries, where the bill is heavier. The IMF notes that very few schemes are time-limited or targeted at the most vulnerable. For about a third of emerging, low-income and island economies, the end date for price measures remains open.

What the IMF recommends

The message applies to the whole region, Cambodia included. Support should be targeted and temporary, rather than delivered through blanket fuel subsidies or price caps. These cost more and blur the price signal that encourages people to use less. The Fund also recommends investing in social registries and payment systems, so that support can be better targeted next time.

The central bank must stay vigilant. If inflation takes hold, it will need to tighten policy. Where expectations are less firmly anchored, the risk is higher.

Risks remain tilted to the downside

The forecasts assume oil supplies return to normal by the end of 2027. A prolonged conflict would keep prices high.

Other threats hang over a heavily agricultural economy. The IMF points to an exceptionally strong El Niño. Sea surface temperatures in the Pacific have hit records. Erratic rainfall would disrupt planting and harvests. It would also cut hydroelectric output and reignite food and energy inflation.

A sharp correction in AI-related stocks would hit the region, which is deeply embedded in the production chain. A rise in global interest rates would raise debt-servicing costs.

Medium-term options

The IMF highlights services trade, which accounts for about a quarter of the region's exports but remains poorly integrated. By its estimates, removing regulatory barriers could lift regional GDP by about 1% in the long run. It also argues for stronger social safety nets, so that households save less as a precaution and spend more.

On AI and jobs, the Fund's study finds the impact still limited in low-income economies. The issue remains under watch, as it concerns countries that must create jobs for large numbers of young people.

Source: IMF, Regional Economic Outlook: Asia and Pacific, October 2026.