AMRO & Report: Cambodia’s Economy to See Growth in 2024

The ASEAN+3 Macroeconomic Research Office (AMRO) released on Thursday its regional economic outlook, confidently predicting a positive year ahead for Cambodia.

Construction in Phnom Penh. Photo CG

The report forecasts Cambodia’s economy to grow by 5.6 % in 2024, surpassing the 5 % recorded in 2023. This upward trend is attributed to several factors, including the garment sector and non-garment exports, as well as continued tourism.

The country’s growth is mainly driven by garment exports, tourism, agriculture, construction, and real estate. AMRO has highlighted a recovery in the garment sector, sustained expansion in other manufacturing exports, and continued tourism rebound will support the ongoing economic recovery. However, the report also acknowledges potential challenges.

The recovery trajectory is contingent on external risks and domestic vulnerabilities, particularly prolonged weakness in the real estate sector and a decline in credit quality.

According to AMRO, the Royal government must act now to restore fiscal space, mitigate financial stability risks, and strengthen structural reforms to ensure resilient growth. The Cambodian economy is projected to grow by 5.9 % in 2025, adds the report.

Policy recommendations

The report also underlines : « In light of the widened fiscal deficit in 2023 due to the fall in revenue, the focus should now shift toward fiscal consolidation and the rebuilding of fiscal space. Increasing the efficiency of expenditure is important to enhance economic development outcomes and boost growth potential. It will be crucial to raise revenues to secure funds for development needs while enhancing fiscal sustainability. Streamlining tax incentives for investment is also necessary to preserve fiscal space and limit forgone revenue.

The National Bank of Cambodia’s (NBC) should resume its post-COVID normalization of forbearance policies next year. The NBC should closely monitor sectoral NPLs and ensure that banks maintain adequate provisions. Policy frameworks should be strengthened to foster interbank market development.

The Non-Banking Financial Services Authority (NBFSA) should establish a comprehensive legal framework and strengthen the regulatory oversight and supervision of under-regulated shadow banking activities in the real estate sector to mitigate the hidden credit risks. Fortifying oversight and supervision of the real estate sector should also be a priority.

To secure long-term resilient growth, the government should ensure a timely implementation of the Pentagonal Strategy – Phase I to nurture human capital and promote FDI; escalate physical and digital infrastructure development; and accelerate exports diversification and enhance the role of Cambodia in the global value chain.

The document is based on the preliminary assessment by AMRO following its Annual Consultation Visit to Cambodia from 2 to 13 May 2024. The mission was led by AMRO Principal Economist Jinho Choi, with AMRO Director Kouqing Li and Chief Economist Hoe Ee Khor also participating in the policy discussions.

The discussions focused on Cambodia’s recent macroeconomic developments and outlook, risks and vulnerabilities, and policy recommendations to secure resilient growth and financial stability ».

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The ASEAN+3 Macroeconomic Research Office (AMRO) is an international organization established to contribute toward securing macroeconomic and financial resilience and stability of the ASEAN+3 region, comprising 10 members of the Association of Southeast Asian Nations (ASEAN) and China; Hong Kong, China; Japan; and Korea. AMRO’s mandate is to conduct macroeconomic surveillance, support regional financial arrangements, and provide technical assistance to the members. In addition, AMRO also serves as a regional knowledge hub and provides support to ASEAN+3 financial cooperation.