Publication: Cambodia Economic Update, December 2025: Coping with Shocks
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2025-12-10
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2025-12-16
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Cambodia is facing substantial risks to macroeconomic stability and sustained growth from three simultaneous shocks: an ongoing property market downturn, the Cambodian-Thai border conflict, and rising trade restrictions. First, a sustained property sector downturn is weighing heavily on domestic demand. Second, the Cambodian-Thai border conflict has worsened economic challenges by disrupting labor markets, remittance flows, tourism, and supply chains. Third, adverse shifts in trade dynamics are expected to dampen Cambodia’s goods exports - which account for two thirds of gross domestic product (GDP )- particularly due to the implementation of a 19 percent tariff on exports to the U.S. market. On the domestic front, mounting labor market pressures and rising non-performing loans (NPLs) can further undermine economic activity. In addition, the possibility of renewed border conflict poses further risks. Externally, weaker global demand - exacerbated by shifts in trade policy and a slower-than-expected recovery in China, Cambodia’s primary source of foreign direct investment (FDI) and tourism - will further weigh on the outlook. Coordinated monetary and fiscal policy strengthens macroeconomic management and financial stability by balancing growth, inflation, and sustainable economic performance. Aligning these tools helps Cambodian authorities respond effectively to shocks: monetary policy; fiscal and sectoral policy; structural policy.
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“World Bank. 2025. Cambodia Economic Update, December 2025: Coping with Shocks. © World Bank. http://hdl.handle.net/10986/44084 License: CC BY-NC 3.0 IGO.”
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