- Growth is projected to slow to 3.0 percent in 2026, as higher energy costs, weaker tourism and remittances, slowing garment exports, subdued domestic demand, and tighter financial conditions weigh on activity.
- Risks to growth are tilted to the downside amid potential energy and trade disruptions, continued real estate weakness, financial integrity concerns, and financial vulnerabilities. The authorities’ fiscal stimulus could boost growth, while inflation risks remain elevated.
- Targeted fiscal support, agile monetary policy, decisive balance-sheet repair, and stronger financial integrity and structural reforms are essential to strengthen resilience and safeguard macro-financial
Washington, DC: On September 22, 2026, the Executive Board of the International Monetary Fund (IMF) completed the Article IV Consultation for Cambodia and endorsed the staff appraisal without a meeting on a lapse-of-time basis.[1] The authorities have consented to the publication of the Staff Report prepared for this consultation.[2]
Cambodia’s economy remained resilient in 2025, supported by robust manufacturing exports, foreign direct investment, and infrastructure projects. Growth nevertheless slowed to 5.3 percent as domestic demand remained subdued amid a prolonged real estate correction. Border tensions with Thailand reduced land-based tourism and remittances and prompted the return of nearly one million migrant workers. Inflation rose sharply in early 2026, initially driven by higher energy prices but increasingly becoming broad based. Financial conditions also tightened, with weaker credit and deposit growth and rising asset-quality pressures.
Growth is projected to slow to 3.0 percent in 2026 before recovering to 4.0 percent in 2027, reflecting higher energy costs, weaker tourism and remittances, decelerating garment exports, subdued domestic demand, and tighter financial conditions. Inflation is expected to remain elevated at 5.6 percent in 2026 before easing as energy prices normalize. The current account deficit is projected to widen sharply, although resilient foreign direct investment and adequate international reserves provide important buffers. Risks to growth are tilted to the downside, including from renewed energy and trade disruptions, persistent scam activities, and a sharper real estate correction. On the upside, the authorities’ planned fiscal stimulus could boost growth. Potential disruptions from El Niño conditions could keep price pressures elevated.
Executive Board Assessment[3]
Cambodia’s economy has remained resilient through successive and concurrent shocks, but the near-term outlook has weakened with signs of macro-financial strains. Growth is projected to slow in 2026 as higher energy costs, weaker tourism and remittances, decelerating garment exports, subdued domestic demand, and tighter financial conditions weigh on activity. Inflation has risen sharply and broadened beyond energy prices. The fiscal deficit remains within the authorities’ prescribed ceiling, and public debt is sustainable with a low risk of debt distress. The current account deficit is projected to widen in 2026, though foreign exchange reserves provide adequate buffers. The 2025 external position is assessed as broadly in line with fundamentals and desirable policies. The end of regulatory forbearance has exposed asset-quality strains amid continued real estate weakness and financial integrity concerns, and financial vulnerabilities have heightened although systemic risks remain contained.
Risks to growth are tilted to the downside, while inflation risks remain on the upside. Trade policy uncertainty and persistent scam activities could further weaken exports and tourism, hamper investment, and raise financial stability concerns. Renewed energy market volatility, supply disruptions, and climate shocks could raise price volatility and reduce activity. A sharper real estate correction could amplify losses through concentrated bank exposures, developer financing, and weakened repayment capacity. On the upside, the authorities’ planned fiscal stimulus could boost growth, and stability in the global commodity markets would ease inflation and support activity.
Fiscal policy needs to cushion the near-term slowdown through targeted support and advance development priorities over the medium term, while maintaining debt sustainability. Broad fuel-related support should be phased out as price pressures ease, with assistance focused on vulnerable households. As concessional financing declines, stronger domestic revenue mobilization, domestic bond market development, and better expenditure allocation and execution will be essential to finance development priorities. Transparent costing and rationalization of tax expenditures, stronger compliance, and tax-base broadening are needed for sustained revenue mobilization. Operationalizing the fiscal rule and buffer fund, improving public investment and cash management, and strengthening oversight of PPP and SOE risks would help rebuild policy space. Enhancing the integrity of the treasury single account will help make judicious borrowing decisions, well aligned with actual financing needs.
Monetary policy needs to remain agile to evolving inflation and foreign currency liquidity pressures. The broadly stable riel–U.S. dollar exchange rate continues to provide the main nominal anchor. Absorbing the excess riel liquidity through market-based operations is needed if second-round inflationary pressures broaden. Any foreign currency liquidity support should be temporary, collateralized, limited to solvent institutions, and consistent with preserving reserve adequacy. More effective liquidity forecasting and operations, deeper interbank markets, and stronger transmission in riel would improve policy effectiveness and support gradual de-dollarization.
Financial sector priorities are decisive balance-sheet repair, stronger NPL resolution, and tighter oversight to safeguard financial stability. This requires timely risk recognition, adequate provisioning, and credible capital planning, using bank-specific stress testing and forward-looking assessments to differentiate their responses. The authorities need to operationalize crisis-management tools, make emergency liquidity assistance available only to institutions assessed as solvent, and resolve nonviable institutions promptly. The deposit protection and out-of-court liquidation frameworks should be finalized, while NPL resolution and foreclosure procedures should be strengthened. Better reporting and closer coordination are needed to strengthen oversight of concentrated real estate, developer, large-borrower, and related-party exposures.
