Cambodia’s economy is projected to grow by 4.8 percent in 2025, down from 6 percent in 2024, as domestic and external shocks dampen activity. Prudent fiscal and monetary policies, along with targeted structural reforms, are seen as essential to cushion the slowdown and strengthen economic resilience. The December 2025 Cambodia Economic Update, Coping with Shocks, highlights the impact of a softening property sector, border disruptions, and new trade restrictions on growth. The property market downturn has weakened domestic demand and construction, while border tensions have affected labor markets and tourism.
World Bank Country Manager Tania Meyer noted that Cambodia is navigating a challenging period and emphasized that strong buffers and targeted reforms can help the country withstand these pressures. Protecting vulnerable households, including returnees, is essential, alongside measures to improve the business environment, support informal enterprises, and ease formalization to unlock growth and create higher-quality jobs.
Cambodia enters this period with solid macroeconomic buffers. International reserves cover around 7.5 months of imports, public debt is low at approximately 26 percent of GDP, and inflation remains contained at 2.7 percent. Foreign direct investment inflows reached $2.3 billion in the first half of 2025, up 28.4 percent year-on-year, helping offset external imbalances. However, government revenue is expected to remain subdued amid weaker consumption, and the current account deficit is likely to widen.
To address these challenges, the report suggests immediate measures such as emergency cash transfers and training and job placement for returnee migrants to support vulnerable households and domestic demand. Medium-term reforms focus on reducing business costs, improving small enterprise access to finance, and streamlining trade and logistics through digitization.
A special focus on the informal economy shows that informal businesses, which account for roughly 90 percent of enterprises and 88 percent of employment, play a critical role in sustaining household incomes and supporting economic resilience. While informal firms are on average 2.6 times less productive than formal ones, the sector is highly diverse, ranging from basic livelihood “Survival Enterprises” to highly productive firms capable of competing with formal businesses.
The report recommends expanding social protection for owners of Survival Enterprises, assisting viable informal businesses to grow and increase productivity, and supporting the most productive informal businesses to formalize by lowering registration costs, expanding digital services, and providing clear incentives.
