Cambodia’s economy is expected to grow by 4.8 percent in 2025, easing from 6 percent in 2024 as the country faces a mix of domestic and international challenges. According to the World Bank’s Cambodia Economic Update – December 2025, titled Coping with Shocks, the slowdown highlights the need for strong economic management, targeted reforms, and renewed efforts to support vulnerable households.
This comprehensive analysis outlines the key pressures shaping the economy—from a weakening property market to border disruptions—and recommends practical steps to reinforce Cambodia’s resilience and long-term competitiveness.
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Economic Growth Moderates as Pressures Mount
The report shows that Cambodia’s growth is cooling as local and external shocks disrupt economic activity. Three main factors are driving the slowdown:
- A softening property sector, which has led to weaker construction and reduced consumer spending
- Border disruptions affecting labor mobility and tourism
- New trade restrictions, which are weighing on exports and business confidence
Despite these challenges, the World Bank notes that Cambodia remains well-positioned to recover—provided that fiscal discipline and structural reforms continue in the months ahead.
World Bank: Reforms and Strong Buffers Are Key to Stability
“Cambodia is navigating a difficult moment, shaped by both internal and external pressures,” said Tania Meyer, World Bank Country Manager for Cambodia. She emphasized that strong economic buffers and targeted reforms can help the country absorb current shocks.
Support for vulnerable households—including returning migrant workers—remains a top priority. At the same time, improving the business environment and helping informal enterprises transition toward formalization will play a major role in boosting competitiveness and job quality.
Cambodia’s Economic Fundamentals Remain Strong
Even with current pressures, Cambodia maintains solid macroeconomic footing:
- International reserves cover about 7.5 months of imports
- Public debt stands at a low 26% of GDP
- Inflation remains stable around 2.7% in 2025
- Foreign direct investment (FDI) reached $2.3 billion in the first half of 2025 — a 28.4% increase year over year
These strengths provide Cambodia with important defenses against global economic uncertainty. However, the report warns that government revenue remains soft due to slowing consumer activity, and the current account deficit is likely to widen.
Short-Term Measures: Supporting Households and Stimulating Demand
To respond to immediate challenges, the World Bank recommends several urgent interventions aimed at stabilizing household incomes and strengthening domestic demand:
- Emergency cash transfers for vulnerable families
- Skills training and job-placement programs for returning migrant workers
- Support for informal workers affected by border disruptions and declining local activity
These actions are designed to protect at-risk communities while helping maintain economic momentum during turbulent times.
Medium-Term Reforms: Reducing Costs and Improving Competitiveness
Looking beyond the immediate pressures, the report highlights several structural reforms needed to support sustainable growth:
1. Lowering the Cost of Doing Business
Simplifying regulations and reducing business expenses can help attract investment and boost private-sector growth.
2. Expanding Access to Finance
Small and medium-sized enterprises (SMEs) still struggle to obtain affordable financing. Expanding credit access would support innovation and business expansion.
3. Digitizing Trade and Logistics
Modernizing customs processes, documentation, and trade operations through digital tools can reduce delays and improve Cambodia’s appeal as a regional manufacturing and logistics hub.
The Informal Economy: A Critical Part of Cambodia’s Workforce
A special chapter, Insights into the Informal Economy, highlights the importance of informal businesses, which:
- Represent about 90% of all enterprises
- Provide 88% of Cambodian jobs
This makes the informal sector a vital pillar of household income and a key contributor to overall economic resilience.
However, the report notes that informal firms are 2.6 times less productive than formal ones on average. Still, productivity levels vary widely across the informal sector.
Survival Enterprises vs. High Performers
The informal economy is far from uniform. The report identifies two main categories:
1. Survival Enterprises
Small operations that exist to meet basic household needs and often lack access to capital, training, and formal support systems.
2. High Performers
Informal firms with productivity levels equal to—or even higher than—some formal businesses but often held back by regulatory barriers, high costs, and limited access to digital services.
Policy Recommendations to Strengthen and Formalize the Informal Sector
To support a more inclusive and productive economy, the World Bank recommends a three-part strategy:
1. Expand Social Protection for Vulnerable Enterprises
Provide targeted financial assistance and social safety nets for owners of Survival Enterprises.
2. Help Viable Informal Businesses Grow
Offer training, financing options, and productivity-boosting programs to help promising businesses scale.
3. Make Formalization Easier and More Attractive
Reduce registration costs, expand digital public services, and introduce clear incentives to encourage informal firms to join the formal economy.
Conclusion: Building a More Resilient and Inclusive Cambodian Economy
Cambodia’s economic outlook for 2025 reflects both resilience and vulnerability. While growth is slowing, the country’s strong economic fundamentals and rising foreign investment provide a stable foundation.
With the right mix of short-term support, medium-term reforms, and long-term strategies to empower informal enterprises, Cambodia can strengthen its competitiveness, protect vulnerable families, and pave the way for more sustainable and inclusive growth.