Press Release No. 25/017

Washington, DC: The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation^[1] with Cambodia.

Cambodia’s economy has continued to recover, albeit at a modest pace. We project real GDP to grow from 5.5 percent in 2024 to 5.8 percent in 2025 and inflation to pick up from 0.5 percent in 2024 to 2 percent in 2025 and remain contained. However, risks to the outlook are tilted to the downside from both external factors and domestic vulnerabilities, including from policy changes by major trading partners, geoeconomic fragmentation, and continued weakness in the construction and real estate sectors.

The recovery remains uneven. Real GDP growth is driven mainly by external demand, with a strong rebound in garment exports and high growth in agricultural exports. Tourism has experienced a structural shift in its composition, resulting in a lagged recovery in tourism receipts. Growth in non-tradable sectors remains weak. After a sustained credit expansion that lifted the credit-to-GDP ratio from 24 percent in 2010 to 135 percent in 2023, credit growth has come to a near halt. The construction and real estate sectors are undergoing a correction, with rising non-performing loans and emerging signs of private-sector debt overhang.

We project the fiscal deficit at 2.4 percent of GDP in 2025, down from 3 percent in 2024, with a gradual fiscal consolidation envisaged in the medium-term fiscal framework. Public debt remains well-contained, staying below 30 percent of GDP over the next decade. The current account balance is projected to swing back to a deficit of 1.8 percent of GDP in 2024 as strong demand for imports outpaces the recovery in exports and tourism. The deficit is projected to increase somewhat in 2025, reaching 2.5 percent of GDP, with export growth expected to moderate. 

Executive Board Assessment²

Executive Directors welcomed the continuing recovery of the Cambodian economy, driven by strong growth in garment and agricultural exports, and improving tourism activity. Nonetheless, the recovery has been uneven, and while growth is expected to continue, risks to the outlook are tilted to the downside. Directors underscored the importance of policies to safeguard macro financial stability, ensure a durable and inclusive recovery, and achieve the authorities’ development goals over the medium term.

Directors supported a neutral fiscal stance in the near term and highlighted the importance of gradual and high-quality consolidation over the medium term underpinned by sound fiscal frameworks to maintain debt sustainability and strengthen economic resilience. They welcomed the recent publication of a medium-term fiscal framework but recommended strengthening it with more conservative and transparent fiscal rules. Directors stressed the need to further mobilize revenues through rationalizing tax exemptions and implementing tax policy reforms, while enhancing spending efficiency and strengthening public investment management, in order to help rebuild fiscal buffers and safeguard priority social and capital spending. Directors welcomed efforts to foster the development of the domestic government bond market as Cambodia’s access to concessional foreign financing will be reduced when it graduates from Least Developed Country status. They also stressed the need for sound management of fiscal risks from state-owned enterprises and public-private partnerships.

Directors supported the measured pace of monetary policy normalization while maintaining adequate financial system liquidity. They encouraged continuing efforts to modernize the monetary policy framework to enhance policy transmission and support de-dollarization. Noting the ongoing corrections in the construction and real estate sectors, declining FDI inflows, and rising nonperforming loans, Directors encouraged phasing out forbearance measures and developing a comprehensive plan to safeguard financial stability. They recommended strengthening risk-based supervision, improving macroprudential policy, enhancing coordination among financial sector supervisory agencies, and intensifying oversight of the real estate sector.

Directors highlighted the importance of structural reforms to promote economic diversification and improve competitiveness. They encouraged the authorities’ efforts to enhance human capital, invest in infrastructure, strengthen the business environment, address climate vulnerabilities, and promote renewable energy to attract more diversified FDI. They also underscored the importance of strengthening governance and institutions, improving transparency, enhancing the AML/CFT framework, and addressing data limitations through  capacity development.

 

Table 1. Cambodia: Selected Economic Indicators, 2021 – 29 1/
Per capita GDP (2022, US$): 1,546                   Life expectancy (2019, years): 75.5 Population (2022, million):    16.7                    Literacy rate (2019, percent):  87.7
	2021	2022	2023	2024	2025	2026	2027	2028	2029
			Est.	Proj.
Output and prices (annual percent change)
GDP at constant prices	3.1	5.1	5.0	5.5	5.8	6.2	6.0	6.0	6.0
Inflation (end-year)	3.7	2.9	2.7	1.5	2.1	3.2	3.0	3.0	3.0
(Annual average)	2.9	5.3	2.1	0.4	2.1	3.2	3.0	3.0	3.0
Saving and investment balance (in percent of GDP)
Gross national saving	0.8	15.6	33.6	30.7	30.0	29.2	29.2	29.2	29.3
Government saving	0.3	3.1	4.1	5.1	6.1	7.1	8.1	9.1	10.1
Private saving	0.5	12.5	29.5	25.6	23.9	22.1	21.1	20.1	19.2
Gross fixed investment	30.4	34.6	32.3	32.5	32.5	32.5	32.5	32.5	32.5
Government investment	6.6	5.6	5.8	5.2	4.5	4.3	4.2	3.9	3.8
Private investment	23.8	29.0	26.5	27.4	28.0	28.2	28.4	28.6	28.7
Money and credit (annual percent change, unless otherwise indicated)
Broad money	16.4	8.2	12.5	8.5	7.9	10.5	11.3	9.1	9.0
Private sector credit	23.6	18.5	3.5	4.0	7.0	10.0	10.0	10.0	10.0
Velocity of money 2/	1.1	1.0	1.0	1.0	1.0	1.0	1.0	1.0	1.0
Public finance (in percent of GDP)
Revenue	15.8	18.1	15.9	14.9	14.9	14.9	15.0	15.1	15.2
Domestic revenue	14.7	16.4	14.7	13.7	13.7	13.8	14.0	14.1	14.4
Of which: Tax revenue	13.2	14.7	13.0	12.1	12.1	12.2	12.3	12.5	12.7
Grants	1.1	1.7	1.2	1.2	1.1	1.1	1.0	0.9	0.8
Expenditure	21.0	18.4	18.7	17.9	17.3	17.1	17.1	17.2	17.1
Expense	14.4	12.8	12.9	12.7	12.8	12.8	13.0	13.3	13.4
Net acquisition of nonfinancial assets	6.6	5.6	5.8	5.2	4.5	4.3	4.2	3.9	3.8
Net lending (+)/borrowing(-)	-5.2	-0.3	-2.8	-3.0	-2.4	-2.2	-2.1	-2.1	-2.0
Net lending (+)/borrowing(-) excluding grants	-6.3	-2.0	-4.0	-4.2	-3.6	-3.3	-3.2	-3.0	-2.8
Net acquisition of financial assets	-3.6	1.4	-0.3	-0.2	0.5	0.3	0.2	0.3	0.4
Net incurrence of liabilities 3/	1.6	1.7	2.5	2.8	2.9	2.5	2.4	2.4	2.4
Total public debt (In percent of GDP)	25.9	25.0	25.7	26.8	27.8	27.8	27.8	27.7	27.7
Balance of payments (in millions of dollars, unless otherwise indicated)
Exports, f.o.b.	19,527	23,175	23,569	26,745	28,595	30,942	33,449	36,307	39,457
(Annual percent change)	5.7	18.7	1.7	13.5	6.9	8.2	8.1	8.5	8.7
Imports, f.o.b.	-30,726	-31,995	-26,553	-31,055	-33,244	-35,626	-38,605	-41,871	-45,434
(Annual percent change)	46.4	4.1	-17.0	17.0	7.0	7.2	8.4	8.5	8.5
Current account (including official transfers)	-10,886	-7,572	555	-847	-1,269	-1,794	-1,993	-2,175	-2,283
(In percent of GDP)	-29.6	-19.0	1.3	-1.8	-2.5	-3.3	-3.3	-3.4	-3.2
Gross official reserves 4/	20,265	17,805	19,998	20,753	23,064	26,887	30,951	35,422	40,351
(In months of prospective imports)	7.0	7.3	6.9	6.6	6.9	7.4	7.9	8.3	8.7
Total public debt (in millions of dollars)	9,505	9,971	11,187	12,473	13,932	15,218	16,508	17,912	19,453
(In percent of GDP)	25.9	25.0	25.7	26.8	27.8	27.8	27.8	27.7	27.7
External debt (in millions of dollars, unless                                    otherwise indicated)
Public external debt	9,505	9,971	11,187	12,387	13,726	14,939	16,178	17,548	18,978
(In percent of GDP)	25.9	25.0	25.7	26.6	27.4	27.3	27.2	27.1	27.0
Public debt service	397	427	449	418	439	458	482	506	533
(In percent of exports of goods and services)	2.0	1.7	1.6	1.3	1.3	1.2	1.2	1.2	1.1
Nominal effective exchange rate (index, trade partners by CPI)	113.3	122.4	123.3	…	…	…	…	…	…
Real effective exchange rate (index, based on CPI)	125.3	134.0	132.4	…	…	…	…	…	…
Memorandum items:
Nominal GDP (in billions of Riels)	150,793	164,059	177,719	190,603	205,946	225,291	245,726	267,845	292,066
(In millions of U.S. dollars)	36,797	39,838	43,304	46,568	50,180	54,745	59,548	64,733	70,395
Sources: Cambodian authorities; and IMF staff estimates and projections.
1/ Based on the rebased GDP.
2/ Ratio of nominal GDP to the average stock of broad money.
3/ Includes statistical discrepancy.
4/ Includes unrestricted foreign currency deposits held at the National Bank of Cambodia.

 

[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

[2] At the conclusion of the discussion, the Managing Director, as Chair of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summing up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm.