The Asian Development Bank (ADB) has upheld its economic projections for Cambodia, forecasting 5.8% growth for 2024 and 6.0% for 2025.

Meanwhile, the inflation outlook for 2024 has been revised down from 2.0% to 0.5%, attributed to lower food price increases and a drop in fuel costs during the first half of the year, according to the latest Asian Development Outlook (ADO) report released today, September 25.

"The recovery in the manufacturing sector, particularly in garments, footwear and travel goods [GFT], is driving Cambodia's economic growth," said ADB country director Jyotsana Varma. "In addition, agriculture and tourism are making steady progress, and sustained foreign direct investment is supporting the nation’s economic momentum, paving the way for a promising 2024 and strong growth into 2025 and beyond."

The report noted the reduction in inflation is expected to alleviate pressure on households, particularly the most vulnerable, who have been affected by rising costs in recent years. Lower fuel and fertiliser prices are expected to boost agricultural production, offering further relief.

It highlighted a 16.9% increase in GFT exports in the first half of 2024, reversing an 18.6% decline from the same period last year. However, exports of non-GFT products grew by only 1.3%, down from 21.2% previously. Meanwhile, imports of construction materials and equipment rose by 23.3%, driven by public infrastructure projects.

According to the ADO, agricultural growth is forecasted at 1.2% for 2024 and 1.3% for 2025. The services sector is expected to grow by 5.4% in 2024 before slowing slightly to 5.2% in 2025, supported by a 22.7% increase in tourist arrivals, reaching nearly 95% of pre-pandemic levels.

Foreign investment inflows remained steady, reaching $2 billion by mid-2024, slightly down from $2.1 billion during the same period last year. Growth in nonfinancial sectors helped sustain these figures, although investment in the financial sector decreased due to lower banking profits, it said.

Risks to Cambodia's economic outlook include potential slowdowns in major economies like China, the EU and the US, high levels of private debt, fluctuating global fuel prices and the threat of extreme weather events, according to the report.

Hong Vanak, an economics researcher at the Royal Academy of Cambodia, stated that the growth forecasts by ADB and the government remain positive due to sustained exports to the US, the EU and countries under the Regional Comprehensive Economic Partnership (RCEP). However, he noted a decline in the export of bicycles and electrical components.

He pointed out that the drop in fuel prices has benefited the public and farmers, positively impacting the country’s economic growth.

Regarding the tourism sector, he noted that while there has been growth compared to 2022 and 2023, it remains at a lower level.

“Overall, these factors support ADB's forecast. What I have mentioned are just a few points, while ADB's evaluation is based on a broader set of accurate indicators,” Vanak said.