Cambodia's economic growth faces challenges

Cambodia's economic growth has experienced challenges in 2025 and is set to face more in 2026, but experts say the disruptions are just temporary.

The country's economy was forecast to grow 5.2 percent in 2025, down from its earlier projection of 6.3 percent, due to US tariffs and border tensions, Cambodian Minister of Economy and Finance Aun Pornmoniroth said on Wednesday.

Cambodia has been hit with a 19 percent tariff on all goods exported to the United States.

However, Pornmoniroth, who is also Cambodia's deputy prime minister, said the kingdom still maintains good growth momentum, supported by export-oriented sectors and strong domestic consumption, amid the trend of supporting and using domestic products, according to a Xinhua News Agency report.

Chheang Vannarith, director of the China-ASEAN Studies Centre at Cambodia University of Technology and Science in Phnom Penh, said the downward pressures are mainly driven by border tensions with Thailand and the "reciprocal" tariffs imposed by the US.

In response to the economic slowdown, Chheang said that international integration through frameworks such as the Regional Comprehensive Economic Partnership and the Cambodia-China Free Trade Agreement is critical to national development and resilience.

The Cambodian government has raised its budget for 2026 to $10 billion, up 7.8 percent from 2025 expenditure.

Chheang said the increased budget aims to promote resilience by strengthening economic productivity and competitiveness, as well as social protection, human capital and infrastructure development, national defense, governance reform, and state building.

The International Monetary Fund said on Nov 26 that it expects Cambodia's economic growth to slow down to 4.8 percent in 2025 and 4 percent in 2026. The IMF cited factors including export volatility, declining remittances, a slowdown in tourism and weak domestic demand.

Short-term effect

Arnaud Darc, CEO of Thalias Hospitality, said in a social media post on Thursday that the projected 4 percent growth rate for 2026 is a temporary softening due to short-term disruptions, rather than the structural forces shaping the long-term economic trajectory.

"The closure of the Cambodia-Thailand border in 2025 represents the most significant short-term economic disruption since the pandemic," Darc said.

For example, bilateral trade between Cambodia and Thailand dropped by more than 90 percent during the border closure, said Darc, adding that exporters reliant on land transit had to reroute via longer corridors and deal with increased logistics costs of 8 to 12 percent.

Thong Mengdavid, a lecturer at the Institute for International Studies and Public Policy of the Royal University of Phnom Penh, told China Daily that the lowered growth projections highlight both immediate shocks and deeper structural weaknesses, while the expanded 2026 budget and the visa-free pilot program for Chinese visitors, to be carried out from June 15 to Oct 15 next year, could possibly offer potential advantages.

"If the visa-free trial succeeds in revitalizing tourism and related services, it could provide an important buffer against external pressures, support economic momentum, and maintain employment," said Mengdavid.

He said that broader reform will be necessary to make long-term progress for more resilient and diversified growth.