Economic Overview

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Cambodia has enjoyed steady economic growth since 2012, with GDP growth averaging nearly 7%. Nevertheless, the country’s economy experienced an unprecedented contraction in 2020, with GDP turning negative by 3.1% (from +7.1% one year earlier - IMF, 2022), due to the global COVID-19-related crisis: although health-wise the country was not severely impacted, international travel restrictions weighed heavily on the tourism sector (which accounts for almost one-fifth of GDP alone), as well as on foreign demand for textiles-clothing and travel goods. Household consumption was also hampered by the pandemic. The situation stabilized in 2021 (+3%) and the IMF expects Cambodia’s GDP to reach 6.2% in 2023 followed by 6.6% growth in 2024.

Cambodia's public deficit widened in 2020, reaching 35.2% of GDP (from 28.6% one year earlier), and then 36.3% and 36.8% in 2021 and 2022. Although relatively low, it is mostly held by foreigners (especially China) and denominated in foreign currencies. Similarly, the economy is highly dollarized, exposing an already fragile banking sector to substantial currency risks. Furthermore, private sector indebtedness is extremely high, especially household indebtedness. The economic measures taken to offset the pandemic-led crisis – targeted primarily towards the tourism, textiles and aviation sectors and to social assistance for most vulnerable households – led to a current account deficit of 47.9% of GDP in 2021. As government revenues dropped and most measures have been extended, the deficit reached 31.3% in 2022 and is forecasted to come back to 17% in 2023 (IMF, 2023). Inflation also saw a rise at 2.9% in 2020 (from 2% one year earlier) and 2021, before reaching 5.2% in 2022. It should follow an downward trend with 3.8% in 2023 and 3% in 2024 (IMF, 2023). The Kingdom remains dependent on international aid, especially from China. Agriculture represents 22.8% of GDP (World Bank, 2022) and includes rice, rubber, corn, vegetables, cashews, cassava (manioc, tapioca), tobacco, and silk. However, the primary sector is vulnerable to climatic events, and production remains largely insufficient. Industry represents an additional 27.9% of GDP, which includes garments, construction, rice milling, fishing, wood and wood products, cement, gem mining, and other textiles. Services account for almost 38%, with the number of tourists constantly increasing in recent years (reaching 6.6 million foreign visitors in 2019, +6.6% y-o-y – though in the first ten months of 2020 foreign arrivals decreased by 76% and then was non existent due to the pandemic). Offshore hydrocarbon reserves were recently discovered and could present a significant advantage for the country; however, the first extraction has been constantly postponed, until Singapore-based oil and gas exploration company KrisEnergy Ltd finally extracted the first drop of crude oil from Cambodian waters in December 2020. The government led by Prime Minister Hun Sen of the Cambodian People's Party (CPP) has been ruling for 35 years and has all the seats in the National Assembly. However, it has been facing increasing protests following the severe enforcement of anti-pandemic measures and a decline in economic activity. The EU reviewed its trade agreement with Cambodia and diplomatic and economic relations with the U.S. have deteriorated (curtailing several public aid programmes, including military assistance), thus pushing the country to strengthen its ties with China.

The official unemployment rate was below 3% in 2021, although this number severely hides the near unemployment conditions of many Cambodian workers. According to a report from the International Labour Organization, half of the jobs in Cambodia are "vulnerable" (higher than the average in Southeast Asia) as most people are underemployed or juggle between several part-time jobs. Unemployment reached 2% in 2022 (World Bank, 2022). The poverty rate has decreased significantly in the decade, dropping to 12.9% of the population in 2010 compared to 47.8% in 2007 (Asian Development Bank, 2022); however, the effect of the pandemic was significant and Cambodia counts about 17.8% of its population still living under the poverty line (Khmer Times, 2022). Inequalities are also evident: while the Gross Domestic Product per capita in Cambodia was last recorded at 4354.57 US dollars in 2021 - when adjusted by purchasing power parity (PPP) - or equivalent to 25% of the world's average, two-thirds of the households in Cambodia experience seasonal food shortages, especially in rural areas, and 32% of children under five are stunted. Such conditions are likely to be exacerbated by the effects of the COVID-19 global crisis (World Bank, 2023).

Foreign Trade

Cambodia is very open to international trade, which represents nearly 132% of GDP (World Bank, 2023). The country has been a member of ASEAN since 1999 and of the WTO since 2004, and it has committed to removing all tariff barriers on imports from ASEAN members. Cambodia began to reform its legal and regulatory systems (intellectual property rights, health rules, non-tariff barriers to trade, etc.), however, in practice, many obstacles remain, including governance issues and a lack of transparency. Cambodia also suffers from logistical and infrastructural constraints. The country mainly exports gold, clothing, footwear, timber and rubber. Illegal timber trade (especially towards Vietnam) is one of Cambodia's greatest challenges despite an official export ban on timber. Imports are led by Gold (26.1% of imports in 2021), refined petroleum (6.5%) and clothing (6.4%).

The main trading partners are the US (42.6%), China (8.6%), Japan (6.2%) and Canada (5.4%), while the bulk of imports comes from China (33.7%), Singapore (17.8%) and Thailand with 12.1% (Comtrade, 2022). It should be noticed that the European Commission decided to withdraw part of the tariff preferences granted to Cambodia under the "Everything But Arms" (EBA) trade scheme due to the serious and systematic violations of human rights. Such measure came into effect on 12th August 2020 and should affect approximately 20% of Cambodia's exports to the EU, including sugar, selected garment and footwear products, and all travel goods.

Cambodia has a structural trade deficit concerning goods. In 2021, total exports of merchandise amounted to USD 17.36 billion USD, with imports growing at a faster pace, to reach USD 28.36 billion USD. Cambodia is usually a net exporter of services (mainly thanks to the tourism sector), but it is not the case since 2020 due to the Covid-19 pandemic. When computing both goods and services, the country’s trade deficit stood at 132% of GDP in 2021 (up from 124% one year earlier (WTO & World Bank, 2022). Cambodia recorded a trade deficit of 1676 KHR Billion (411.77 million USD) in November of 2022 (National Bank of Cambodia, 2023).