Cambodia's economic growth: MEF revises its forecast for 2025 amid uncertainty

The Cambodian Ministry of Economy and Finance (MEF) recently revised downwards its gross domestic product (GDP) growth forecast for fiscal year 2025, now anticipating expansion of 5%, down from the initial target of 6.3%. This adjustment reflects growing uncertainties on the international stage, including trade tensions and volatility in global markets.

Phnom Penh. Photo CG

A moderate but controlled slowdown

Despite this revision, Cambodia remains one of the most dynamic economies in Southeast Asia. This moderate growth is due to several internal and external factors: the rise in US tariffs on Cambodian exports, a less favourable global trade environment, and slowdowns in key sectors such as real estate and construction. However, the economy still benefits from solid pillars, notably textile and footwear exports, which rose by more than 10% in the first quarter of 2025, as well as a gradual recovery in tourism, which is expected to bring international visitor numbers up by 16% in 2025.

International outlook and cross-analysis

Major international institutions are keeping a close eye on Cambodia. The Asian Development Bank (ADB) anticipates slightly higher growth of around 6.1% in 2025, highlighting the economy's resilience to external shocks but warning of risks related to trade tensions, particularly with the United States and China. The International Monetary Fund (IMF), in its Article IV 2025 report, forecasts a rate of between 5.5% and 5.8%, confirming the mixed impact of external pressures and inflation of around 2%.

The World Bank emphasises the need for greater economic diversification and ambitious fiscal reforms. According to country director Tania Meyer, Cambodia must reduce its dependence on the garment sector and promote industrial development and higher value-added services. This will give new impetus to growth, while improving job creation and strengthening economic stability in the medium and long term.

Structural challenges and policy recommendations

The IMF report highlights several persistent vulnerabilities: high energy costs, more than double those of Vietnam, which are dampening investment attractiveness, and governance that needs significant improvement, particularly in law enforcement and transparency. On the monetary front, experts recommend a gradual normalisation policy to preserve financial stability and encourage the gradual de-dollarisation of the economy.

In terms of fiscal policy, efforts to strengthen public revenue mobilisation are crucial to finance strategic investments in infrastructure and human capital. These reforms should also aim at a more equitable distribution of the tax burden, while taking into account social and environmental concerns.

Towards more sustainable and inclusive growth

The Cambodian government has confirmed its growth ambitions and its commitment to a more diversified and resilient economy. The authorities are focusing on digital development, investing in digital infrastructure and improving online public services to accelerate the transition to a modern and competitive economy in the region. The challenge is considerable: to become an upper middle-income country by 2050 while improving living conditions for the population.