Over the past decades, Cambodia has experienced significant economic growth, averaging 7% annually pre-pandemic. The growth has been primarily driven by four key sectors: agriculture, garment, tourism and construction. 

The garment industry, fuelled by strong export market demand, has been particularly influential, accounting for about 80% of the country’s total exports in recent decades and positioning Cambodia as a major garment exporter.

The tourism sector has also made substantial contributions to economic growth, marked by a steady increase in foreign tourist arrivals. Before the global financial crisis in 2008, the construction and real estate sectors saw a boom, largely due to capital inflows from South Korea and China.

According to the International Monetary Fund (IMF), Cambodia’s economy grew by 5.3% in 2023, driven by a resurgence in tourism and a robust performance in non-garment exports post-pandemic. 

For 2024, the nation’s economy is projected to grow by approximately 6.6%, bringing the gross domestic product (GDP) to around 142.957 billion riel, or about $35.168 billion. GDP per capita is expected to reach $2,071, up from $1,917 in 2023, as per the Ministry of Economy and Finance.

The Council for the Development of Cambodia (CDC) reported in 2023 that the country received 268 investment projects with a nearly $4.9 billion capital investment, a more than 20% increase from the $4 billion recorded in 2022. These projects are expected to create around 307,000 jobs. 

As a focal point for foreign direct investment (FDI) in Southeast Asia, Cambodia anticipates a strong influx of capital in 2024, supported by a solid economic recovery. 

The IMF forecasts a 6.1% growth for the country in 2024, a figure that was included in the annual FDI Standouts Watchlist from fDi Intelligence, a division of the Financial Times (FT) Group, released in mid-December.

The 2008 global economic crisis

Throughout the years of robust growth, we have also witnessed significant economic turbulence. Since mid-2007, the global economy has faced challenges including the global credit crunch, rising inflationary pressures and risks of a sharp global slowdown. 

The financial crisis of 2008, also known as the Great Recession, which originated from the US’ subprime mortgage crisis, significantly impacted the world.

However, Cambodia’s economic growth remained resilient that year, with the IMF projecting a Real GDP growth of 6.5%, compared to 10.25% in 2007, although it dipped to 0.1% in 2009.

As a small, open economy, Cambodia is particularly vulnerable to global economic fluctuations, especially due to its reliance on externally sourced energy. The global oil price hike in 2008 significantly impacted inflation.

Additionally, soaring international food prices caused a spike in local prices, pushing the country’s inflation rate to a peak of 25.7% in May before it moderated to 13.5% in December 2008.

According to the Cambodia Development Resource Institute (CARDI), in response to these economic challenges, the government deployed various macroeconomic policy tools, coordinated by the Price Monitoring Group under the Committee for Economic and Financial Policies. 

A prudent fiscal policy, including tariff exemptions on sensitive products, subsidies and controlled public expenditure, was implemented. It also adapted as rising oil and food prices increased the demand for dollars.

Timely interventions by the National Bank of Cambodia (NBC) were crucial to alleviate inflationary pressures, which could have been exacerbated by riel depreciation and pass-through effects. Despite efforts to ensure exchange rate stability, the effects persisted.

The NBC focused on ensuring macroeconomic and financial stability, actively participating in the government’s policy measures to limit inflationary pressures. These actions improved confidence in government policies and the banking system, leading to a significant increase in foreign reserves, reaching $2.2 billion by the end of 2008.

To curb the booming credit activity and slow the growing monetary base, a series of restrictive measures were introduced. These included doubling the statutory reserve requirement from 8% to 16% and urging banks to limit lending for real estate trading.

Economic hurdles: Covid & war

Following the 2008 global financial crisis, Cambodia experienced a resurgence in economic growth, driven largely by a renewed inflow of foreign direct investment (FDI) across various sectors, notably garment and textile, tourism, and construction and real estate. The growth was particularly marked by substantial investment from China prior to the Covid-19 outbreak in 2020.

The 2022 Economic Census, released in January 2024, provided insights into the pandemic’s impact. Among the affected establishments, 587,793 (34.8%) reported lower revenues in 2022; 433,703 (26.6%) experienced increased expenditures; 212,760 (12.6%) saw declines in market demand; and 153,878 (9.1%) faced a shortage of working capital.

On December 22, 2022, the government launched “The Strategic Framework and Programmes for Economic Recovery in the Context of Living with Covid-19 in a New Normal 2021-23”.

The initiative aims to foster resilient socio-economic growth in the medium and long term, providing a roadmap for implementing government strategies and specific actions.

The central bank acknowledged the government’s effective health policy and management of the pandemic, which facilitated the resumption of domestic economic activities in 2022.

The introduction of economic and financial measures, including the strategic framework and relaxation of regulatory forbearance in the banking sector, played an important role in accelerating the country’s economic recovery.

The Ministry of Social Affairs, Veterans and Youth Rehabilitation reported that over $1.305 billion was allocated for five social protection initiatives during the pandemic. By October 24 last year, $1.213 billion had been expended to support 698,585 households, and from December 2022 to July 2023, an additional $44 million was spent assisting 495,307 households affected by inflationary pressures.

In 2023, the government released $250 million for direct loans from the state-owned Small and Medium Enterprise Bank of Cambodia Plc (SME Bank) and the Agricultural and Rural Development Bank (ARDB) for key sectors like agriculture and ecotourism. 

As of early 2024, SME Bank had extended loans to approximately 3,200 enterprises, totalling about $490 million.

Additionally, the Credit Guarantee Corporation of Cambodia Plc (CGCC) was established on September 1, 2020, and its $200 million Business Recovery Guarantee Scheme (BRGS) launched on March 29, 2021. By November 30, 2023, the corporation had issued 1,880 letters of guarantee (LG) for loans amounting to $159.69 million, supporting micro, small and medium enterprises (MSMEs) affected by the pandemic.

Cambodia’s ambitious plan

On August 24, 2023, upon the inauguration of the seventh-mandate government, Prime Minister Hun Manet, introduced its five-year Pentagonal Strategy-Phase I. The ambitious plan aims to elevate Cambodia to an upper-middle-income country by 2030 and to high-income status by 2050. 

During the launch, Manet reflected on Cambodia’s past 25 years, a period focused on post-war reconstruction, and set forth a vision for the next 25 to build a stronger nation. The strategy comprises five phases, with the first emphasising five key priorities: roads, people, water, electricity and technology.

The premier elaborated that the first phase of the strategy is designed to foster crisis-resilient economic growth, generate employment, reduce poverty, enhance governance and public institutions, and ensure sustainable socio-economic development.

The government recently unveiled a 10-year roadmap for the Master Plan on Cambodian Transit and Logistics System 2023-33. The plan prioritises approximately 174 projects, with an estimated investment cost of $36.679 billion. 

The undertakings span a wide range of areas, including 94 road, eight railway, 23 waterway transport, 20 sea transport, 10 air transportation, 15 logistics system and four other infrastructure development projects. 

Among these, approximately 90 are short and medium-term projects, while the remaining are long-term initiatives, all aiming to integrate various modes of transportation and connect to logistics centres.

Having covered business and economic news in Cambodia, the region and globally over the past decades, The Post’s economic reports will continue to serve as a valuable reference for academics, researchers, businesspeople, investors and the general public in the future.