Cambodia’s economy is projected to grow by 4.8 percent in 2025, slowing from 6 percent in 2024, as domestic and external shocks weigh on activity. The slowdown is driven by a softening property sector, border disruptions, and new trade restrictions, which have dampened domestic demand, construction activity, labor markets, and tourism. Prudent fiscal and monetary policies, along with targeted structural reforms, remain crucial to cushioning the slowdown and reinforcing economic resilience.
According to Tania Meyer, World Bank Country Manager for Cambodia, strong buffers and targeted reforms can help the country withstand these economic pressures. Protecting vulnerable households, including returnees, is essential, while improving the business environment, supporting informal enterprises, and easing formalization are key to unlocking growth, leveling the playing field, and creating better-quality jobs.
Cambodia enters this challenging period with solid macroeconomic buffers. International reserves remain healthy, covering around 7.5 months of imports, public debt is low at approximately 26 percent of GDP, and inflation is contained at an average of 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 due to weaker consumption, and the current account deficit is likely to widen.
The report highlights immediate measures to cushion vulnerable households and support domestic demand, including emergency cash transfers, training, and job placement for returned migrants. Medium-term reforms focus on reducing the costs of doing business, improving access to finance for small enterprises, and streamlining trade and logistics through digitization.
A special focus in the report examines Cambodia’s informal economy, which accounts for roughly 90 percent of enterprises and 88 percent of employment. Informal firms are, on average, 2.6 times less productive than formal firms, yet the sector is highly diverse. It ranges from “Survival Enterprises” providing basic livelihoods for vulnerable families to “High Performers” capable of matching or exceeding the productivity of formal firms.
The World Bank recommends expanding social protection for Survival Enterprise owners, assisting viable informal businesses to grow and improve productivity, and supporting the most productive informal businesses to formalize. Measures include lowering registration costs, expanding digital services, and offering clear incentives to encourage formalization and sustainable growth.
