- Cambodia’s economy has remained resilient, but growth is projected to slow in 2026 amid higher energy prices, trade policy uncertainty, weak tourism, and subdued domestic demand. Inflation has risen, and risks to growth are tilted to the downside.
- Fiscal policy should cushion near-term shocks through temporary and targeted support, while preserving medium-term fiscal discipline. Broad fuel-related support should be unwound as price pressures ease, and revenue mobilization will be critical to sustain priority spending and realize Cambodia’s economic development goals.
- Financial sector policies should focus on safeguarding stability as asset-quality pressures become more visible after the end of regulatory forbearance. Real estate weakness remains a key risk, given banks’ exposure to the sector.
- Structural reforms should strengthen Cambodia’s growth model by improving the business climate, governance and rule of law, labor absorption, export diversification, energy security and efficiency, climate resilience, and data quality.
Phnom Penh: An International Monetary Fund (IMF) team, led by Mr. Kenichiro Kashiwase, held discussions with the Cambodian authorities, private sector representatives, and development partners from June 24 to July 8 for the 2026 Article IV consultation.
At the end of the mission, Mr. Kashiwase issued the following statement:
“Cambodia’s economy has shown resilience in the face of successive shocks, but growth has weakened. Real GDP growth, supported by external demand, foreign direct investment, and infrastructure spending, slowed to 5.3 percent in 2025 from 6.0 percent in 2024. Domestic demand, construction, and real estate remained subdued. Growth is projected to slow further to 3 percent in 2026 before recovering in 2027, as higher energy prices, softer external demand, and reputational damage associated with scam activities weigh on economic activity and weaken tourism and pose risks to financial stability.
“Inflation averaged 2.5 percent in 2025 but rose sharply in May 2026, and is projected to average 5.6 percent in 2026, reflecting the pass-through of higher energy prices. Inflation is projected to moderate in 2027. The riel has remained broadly stable, serving as a nominal anchor for the economy.
“The external position deteriorated in 2025, with the current account moving from a small surplus to a deficit, as imports outpaced still-strong exports and remittances declined following the return of migrant workers. Foreign direct investment remained strong and international reserves remain adequate at about eight months of imports.
“Risks to the outlook are tilted to the downside for growth and to the upside for inflation. Higher or more volatile energy prices, economic impacts of El Niño, trade policy uncertainty, and weaker tourism demand could weigh on activity. Domestically, financial sector vulnerabilities, real estate weakness, and asset-quality deterioration remain key risks.
“In this environment, fiscal policy should cushion near-term shocks while preserving fiscal discipline. Support should be temporary and targeted to vulnerable households and affected firms and avoiding adding to inflation pressures. Broad fuel-related support is regressive and should be unwound to safeguard fiscal revenues as conditions permit. Over the medium term, a credible revenue mobilization strategy is essential to sustain priority spending and allocate budget for realization of the country’s development objectives, while preserving debt sustainability. This should include stronger tax compliance, improved governance of tax exemptions, and efforts to broaden the tax base.
“Monetary policy should remain agile, preserving orderly liquidity conditions while guarding against second-round inflationary pressures. The broadly stable riel-U.S. dollar exchange rate continues to serve as the nominal anchor in Cambodia’s highly dollarized economy. Further efforts to strengthen monetary operations, deepen interbank markets, and improve policy transmission will support gradual de-dollarization. Safeguarding financial stability remains a key priority. The end of broad regulatory forbearance was an important step. Real estate remains a key vulnerability, given its interconnectedness to balance sheets of households, banks, developers, and related businesses. The National Bank of Cambodia implemented early supervisory intervention and should continue to ensure timely recognition of losses and adequate provisioning. Crisis management and bank resolution frameworks should be fully operationalized, with emergency liquidity assistance available only to solvent institutions and with appropriate safeguards.
“Financial integrity risks should be addressed decisively. Improved understanding of risks, stronger inter-agency coordination, and international cooperation would help further strengthen licensing frameworks, governance supervision, and enforcement. This will be important to enhance confidence among depositors and investors, and ensure the integrity and stability of the financial system as a whole.
“Structural reforms are critical to strengthen Cambodia’s growth model and resilience, particularly as the country prepares for graduation from Least Developed Country status. Priorities include improving the business climate, strengthening governance and the rule of law, enhancing skills and labor market absorption, supporting export diversification, and attracting higher-quality investment. Improved energy security and efficiency, greater climate resilience, and reforms to support renewable energy would also improve competitiveness.
“Improving data availability, quality, timeliness, and inter-agency information sharing remain essential for making timely assessment of economic developments and well-informed policy decisions. Better data on labor markets, remittances, real estate, financial conditions, and informal activity would strengthen risk monitoring and policy design.
“The IMF team held discussions with senior officials of the Royal Government of Cambodia, the National Bank of Cambodia, and other public agencies, as well as representatives of the private sector and development partners. The team wishes to express its deep appreciation to the Cambodian authorities and other stakeholders for their warm hospitality and productive discussions.”
READ MORE: https://www.imf.org/en/news/articles/2026/07/07/pr26241-cambodia-imf-staff-completes-2026-article-iv-mission
