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Cambodia Economic Overview

Cambodia experienced two decades of very strong economic growth, averaging 7.6% Gross Domestic Product (GDP) from 1994 to 2015 and 7.0% from 2017 onward. This ranks Cambodia as the sixth fastest growing economy in the world during the past 21 years. This phenomenal growth transformed Cambodia from one of the world’s poorest countries to a lower middle-income country by 2016.

Asian Development Bank Asian Development Outlook 2018 (ADB). The Asian Development Bank (ADB) reported growth to be 7.1% from 2017 – 2018 and a forecasted 7.0% by 2019. The World Bank projected 6.7% by 2020. In the ASEAN countries, Cambodia ranks second – coming very close to Myanmar, in terms of GDP growth rate, while still retaining the 6th spot for the fastest growing economy in the world.

Cambodia is projected to exhibit high economic growth over the next two years, despite a weakening external environment. A key driver of growth in the future will be improving the quality of Cambodia’s human capital, including technical and vocational skills, to meet the demand of the private sector (ADB Country Director for Cambodia Ms. Sunniya Durrani-Jamal).

Growth of industrial output is likely to ease from an estimated 10.8% in 2018 to 10.1% in 2019. Growth in services is expected to moderate slightly, from 6.9% last year to 6.8% in 2019. The agriculture sector is projected to grow 1.7%, down from 1.8% last year. Fiscal deficit is planned to narrow to 4.5% of gross domestic product this year, compared with the 5.1% budgeted by the government last year.

With growth softening, the country’s current account deficit should decrease this year and next, the report says. Inflation is expected to average around 2.5% in both 2019 and 2020. Buoyant investment inflows should more than offset the current account deficit and build up gross foreign reserves to $12 billion in 2019, covering about 6 months of imports.

Challenges remain. The global economic slowdown can be sharper than anticipated. The European Union is discussing the possibility of suspending trade preferences for Cambodia under the Everything But Arms scheme. High credit growth and a concentration in the real estate sector pose risks to financial sector stability. Another key risk is a possible drought this year.

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