Cambodian Economic Outlook

Mekong Strategic Capital shares our latest snapshot on the Cambodian economy and reasons why our mid-term outlook is positive, after a challenging two year period.

Cambodia's economic downturn started in the second half of 2022, about a year before the 2023 national election. It was triggered by tighter global liquidity conditions and a sharp retraction in garment exports, which in turn contributed to a collapse in domestic demand.

We think GDP growth was around 2% in 2023, rather than the official estimate of 5%. The level of domestic spending, tax receipts, bank lending, loan arrears, and net exports (excluding solar) are simply not consistent with an economy growing at 5%. 

We believe the economic downturn “bottomed” in 1H2024, and expect modest growth in 2H204. This outlook is driven by:

• Very strong growth in exports, led by Garments, with exports up over 22% on 2023 (ex “solar”). While good for GDP in its own right, this will also feed into domestic demand eventually.

• Tourism in the first half 2024 was weaker than expected, but we expect a stronger fourth quarter, supported by cheaper flights and greater flight capacity.

• Manufacturing diversification will continue.

• The interest rate cycle has peaked, liquidity has improved and the bank sector is awash in liquidity. Interest rates are on the way down, and loan arrears should start to come down towards end of year.

• Cambodia continues to invest in infrastructure, which will support growth.

• The new Cambodian government continues to impress, but needs to consider more fiscal stimulus.

• The global environment is more uncertain than 6 months ago.

> Download our full analysis:

MSC Economic Snapshot - August 2024.pdf

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