The government has lowered Cambodia’s economic growth forecast for 2026 to 4.2%, down from its previous estimate of 5.0%. The downgrade was attributed to the impact of the current conflict in the Middle East, in addition to earlier US tariffs and the Cambodia-Thailand border dispute.
According to the just-released “Medium-Term Public Financial Framework 2027–2029”, signed by Prime Minister Hun Manet, Cambodia is currently in a transition period, marked by multiple crises and continued high uncertainty caused by the intensified implementation of protectionist policies and trade wars and growing geopolitical and geoeconomic tensions, as well as increasingly severe impacts from climate change and natural disasters.
Notably, it added, over the past two years Cambodia has faced three consecutive “tornadoes”: The implementation of retaliatory tariff policies by the US administration of President Donald Trump, the Cambodia–Thailand border dispute and the war in the Middle East, which has triggered an energy crisis.
These challenges have increased uncertainty and pose risks to Cambodia’s short- and medium-term economic growth prospects.
“In this context, Cambodia’s economic growth, which was projected at 5.0% in the Law on Financial Management for 2026, is now assessed to reach only 4.2% due to the impacts and spillover effects from the Cambodia–Thailand border dispute, crackdowns on online scams and rising energy prices, which have exerted inflationary pressure and continued to affect key sectors such as agriculture, transportation, tourism and wholesale-retail trade,” said the report.
It highlighted that 2027 growth forecast was previously revised downward from 5.5% to 5.0%, due to lingering impacts from the challenges faced in 2026. Growth is projected to average around 5.5% during the medium term (2028–2029), supported by expectations of a recovery in socio-economic activities and a return to normal conditions.
The downward revision is in line with adjustments made by major international institutions, which have revised Cambodia’s economic growth forecasts from their baseline projections issued at the end of 2025 while still maintaining moderate growth expectations.
Specifically:
- The International Monetary Fund revised Cambodia’s growth forecast from 4.2% and 4.7% to 4.0% and 4.7%;
- The World Bank revised forecasts from 4.3% and 4.9% to 3.9% and 4.9%; and
- The ASEAN+3 Macroeconomic Research Office revised projections from 5.1% and 5.3% to 4.9% and 5.2% for 2026 and 2027, respectively.
The April 28 report described the government’s response to current challenges.
“Cambodia, as a small and open economy heavily dependent on international trade, cannot prepare policy measures for every possible scenario. However, Cambodia continues to strengthen and expand its resilience over time through two key approaches:
- Immediate and short-term response measures focused on maintaining macroeconomic and financial stability, protecting livelihoods and ensuring the sustainability of socio-economic activities; and
- Medium- and long-term policy measures focused on continuing structural reforms to promote economic diversification, enhance competitiveness and build socio-economic resilience in preparation for future crises,” it said.
According to the report, the government will continue to track economic and social conditions closely, “in order to introduce necessary, proactive and timely intervention measures in response to changing circumstances”.
“Under these conditions, fiscal policy remains cautious, highly flexible and targeted, in order to ensure the sustainability of public finances,” it added.