Last year’s strong pace of growth in Cambodia continued into early 2025 amid a rebound in garment and agricultural exports and a recovery in tourism, according to the International Monetary Fund ( IMF ).

“However, growth is expected to moderate to 4.8% in 2025 [ compared with 6% in 2024 ],” it warns, “as trade tensions and the border dispute with Thailand – despite the recent ceasefire – begin to weigh on external demand, tourism and remittance inflows.”

The country’s inflation “remains contained” with a forecast of about 2.8% this year, the IMF adds in a statement released on September 2 at the end of a two-week mission to Cambodia.

“[However,] risks to the outlook are heavily tilted to the downside,” the fund notes. “A sharper-than-expected escalation in trade and border tensions could further weaken exports, tourism and growth.”

Moreover, financial sector vulnerabilities, the IMF points out, are a “key concern” with high private sector debt and rising non-performing loans ( NPLs ), which have surpassed 7%, particularly in the tourism and real-estate sectors, and could lead to corporate and household financial stress and weigh on the recovery.

“The IMF team welcomes the authorities’ plans to address rising NPLs,” the IMF states. “A carefully calibrated exit from regulatory forbearance is essential to navigate banks to adequately recognize provision for loan losses.

“Strengthening supervision of banks and non-bank financial institutions with high exposure to the real-estate sector and enhancing the crisis management and bank resolution frameworks are also critical steps to maintain the stability of the economy.

“On the upside, successful reintegration of returning workers [from Thailand] into the domestic labour force could support consumption and mitigate some of the adverse growth effects.

"In this challenging environment, fiscal policy should provide temporary and targeted support to vulnerable households and displaced workers.”

Productivity, competitiveness

In the longer term, “sustaining Cambodia’s economic development and resilience requires accelerating structural reforms that build productive capacity and diversify growth drivers,” the fund argues.

With the country’s impending graduation from UN Least Developed Country status by the end of 2029, “there is a renewed urgency to improve productivity and competitiveness,” the IMF says. “Priorities should include enhancing the business environment by strengthening governance and anti-corruption efforts, improving the rule of law, property rights and access to information, strengthening social safety nets, and investing in human capital to support employment, attract foreign direct investment and facilitate a shift toward higher value-added industries.”

Addressing data limitations, improving the quality of macroeconomic data and enhancing information sharing between government agencies, the IMF adds, would benefit economic monitoring and policymaking.

The number of Cambodian migrant workers returning  home from Thailand, as of August 28, exceeded 870,000. There were also an estimated 31,000 internally displaced people at 47 sites, mostly in northern provinces.

Malaysia brokered a ceasefire between Cambodia and Thailand after five days of heavy fighting along the border in late July. The United States served as the co-organizer of the ceasefire talks while China was an observer.