IMF sharply downgrades Cambodia economic forecasts

• IMF has sharply downgraded Cambodia's economic growth forecast.
• Projected growth for 2025 is 4.8%, potentially falling to 4.0% in 2026.
• Inflation is expected to double to 5.6% due to rising energy prices.
• Key challenges include export volatility, falling remittances, and weak domestic demand.
• Financial sector vulnerabilities and border tensions pose significant risks.

The International Monetary Fund (IMF) has significantly revised downward its economic forecasts for Cambodia, citing a confluence of challenges that are expected to dampen growth and accelerate inflation. The fund now anticipates economic growth to slow to 3% and inflation to double to 5.6%, primarily driven by rising energy prices.

In its latest Article IV Consultation, the IMF projected Cambodia's economic growth to be 4.8% in 2025, with a further potential slowdown to 4.0% in 2026. Inflation is expected to see a modest increase this year before stabilizing in 2026. These downward revisions are attributed to several factors, including export volatility, a decline in remittances, a sluggish recovery in tourism, and weak domestic demand.

The IMF highlighted that external and internal shocks have placed pressure on the economic outlook. These include trade disruptions, heightened border tensions, anemic credit growth exposing underlying vulnerabilities, and a broader economic slowdown. The report also pointed to tariff impacts reducing export revenues and trade policy uncertainty as potential hindrances to export performance.

Furthermore, border tensions are seen as a risk to domestic demand, tourism, and financial sector stability, which is already strained by elevated private debt, rising non-performing loans, and governance weaknesses. Despite these challenges, the IMF noted that deeper regional trade and investment integration present opportunities, and the successful reintegration of returning migrant workers could also provide economic support.