The Asian Development Bank confirms its growth forecast for Cambodia at 5.8% for 2024 and 6.0% for 2025

In a revised outlook, ADB has reduced its earlier inflation projection for 2024. The September 2024 report indicates a reduction in inflation from 2.0% to 0.5%, reflecting the slow increase in food prices and decline in fuel prices in the first half of 2024.

Phnom Penh. Photo CG

"The rebound in the manufacturing sector, particularly in the garment, footwear, and travel goods (GFT) industries, is driving Cambodia’s economic growth," said ADB Country Director for Cambodia Jyotsana Varma.

"There are encouraging signs in the agricultural and tourism sectors, while continued inflows of foreign direct investment are fuelling the country’s economic momentum." "Together, these factors are creating a favourable environment for a promising 2024, and positioning Cambodia for robust growth in 2025 and beyond," she added.

The downward revision of the inflation forecast is attributable to a reduction in the prices of fuel-related goods and services, along with a decline in the cost of fertilisers, which is providing support to agricultural production. This will provide much-needed respite for people, especially the most vulnerable, who have faced challenges in recent years due to rising food and fuel prices.

The report revealS that GFT exports increased by 16.9% year on year in the first half of 2024, demonstrating a recovery from an 18.6% decline during the same period the previous year. Meanwhile, the growth in exports of non-GFT products slowed to 1.3 percent year on year, down from 21.2 percent. Imports of construction materials and equipment increased by 23.3 percent year on year in the first half of 2024, driven by public infrastructure investment.

The agricultural sector is forecast to expand by 1.2% in 2024 and a further 1.3% in 2025. The service sector is forecast to grow by 5.4 percent in 2024, before tapering to 5.2 percent in 2025.

This forecast is supported by a 22.7% year-on-year increase in tourist arrivals in the first half of 2024, reaching 94.8% of the pre-pandemic levels in the first half of 2019.

Foreign investment inflows continued, albeit at a slower pace, reaching US$2 billion by mid-2024, compared to US$2.1 billion during the same period last year. This was supported by growth in the non-financial sectors. However, investment in the financial sector slowed significantly due to lower banking profits.

There are a number of potential risks to Cambodia’s economic outlook, including weaker growth in major economies such as the People’s Republic of China, Europe and the United States, high private debt, volatile global fuel prices and a severe impact from extreme weather events.