Cambodia's Economy Sustains Rapid Growth

According to a recent update from the Asian Development Bank (ADB), Cambodia's economy is anticipated to grow by 5.8% in 2024, with a further boost to 6% in 2025. This projection aligns with a previously released report by the World Bank, which noted a similar growth trajectory, emphasizing the recovery in services and merchandise exports as critical drivers behind this economic momentum.

The ADB's country director for Cambodia, Chhieng Vannak, highlighted the significant recovery of the manufacturing sector, notably in the garment, footwear, and travel goods industriesThis resurgence is playing a vital role in fueling economic growth across the countryIn addition, consistent development in agricultural and tourism sectors, coupled with an influx of Foreign Direct Investment (FDI), provides a sturdy foundation for Cambodia's economic expansion.

As outlined in the ADB report, the robust recovery in manufacturing is set to accelerate industrial output growth to 8.0% in 2024, followed by an increase to 8.4% in 2025. Data from Cambodia’s General Department of Customs and Excise revealed that the first half of this year saw a striking 16.9% year-on-year growth in exports from the garment, footwear, and travel goods sector, marking it as Cambodia's largest source of export revenue

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Between January and August of this year, exports of knitted garments and accessories surged by 20.1%, non-knitted garments also saw a substantial increase of 31.9%, while footwear exports rose by 22.4%, and travel goods manifested a 20.9% uplift.

Trade and investment are pivotal in understanding Cambodia's positive economic trajectoryThe General Department of Customs and Excise reported that from January to August 2024, Cambodia's total trade amounted to $36.94 billion, with trade with members of the Regional Comprehensive Economic Partnership (RCEP) rising to $22.92 billion, comprising 62% of the total trade in that period, and representing an annual growth of 17.2%. Notably, China remains Cambodia's largest trade partnerIn the first eight months of the year, trade volume with China exceeded $10 billion, marking an impressive year-on-year growth of 24.5% to reach $10.07 billion.

The Cambodian Development Council noted that in the first half of this year, 190 new investment and expansion projects were approved, with a total investment agreement of $3.25 billion — an increase that is almost double compared to the previous year, projected to create around 168,000 jobs

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Local companies have stepped up, now accounting for 50.1% of total investmentsForeign direct investment has also seen considerable growth, with China continuing to lead as the foremost foreign investor in Cambodia, contributing $1.38 billion in the first half of this year, which represented 42.6% of total investment for that periodIndustrial projects made up 56% of the investments, infrastructure construction accounted for 23%, tourism took 18%, while agricultural processing captured about 2.2%.

The tourism and services sectors' recovery represents another essential driver of growth for Cambodia's economyThe ADB forecasts that the services sector will grow by 5.4% in 2024. The influx of tourists is notable, with a reported 22.7% year-on-year increase in foreign visitors during the first half of 2024, significantly lifting sectors like hospitality and transportationOfficial statistics reveal that over 3.16 million international tourists visited Cambodia in the first half of this year, alongside 9.7 million domestic travelers, generating tourism-related income of approximately $1.7 billion—an increase of 7% compared to the same period last year

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Tourists from China alone exceeded 380,000, reflecting a remarkable growth of 45%.

The ADB also emphasized that with increased public infrastructure investment, imports of building materials and equipment have significantly surged, rising by 23.3% year-on-yearIn addition, benefitting from a decline in prices for commodities such as fuel and fertilizers, inflation in Cambodia is predicted to drop from 2% to 0.5% in 2024, further supporting agricultural productionThe agricultural sector is expected to grow by 1.3% in 2024, with an increase to 1.4% in 2025.

Despite these positive developments, various risks lurk on the horizon for Cambodia’s economyThe ADB pointed out that although foreign investment remains robust, the growth rate of investments is expected to slow down to $2.0 billion by mid-2024, down from last year's figure of $2.1 billionThe anticipated recovery of the Cambodian real estate market is also expected to be gradual

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