Cambodia's trade-facing manufacturing base is entering a tougher 2026, with resilient garment exports remaining a key support while higher energy costs, border-related disruptions, and financial-sector confidence pressures test the economy, according to the ASEAN+3 Macroeconomic Research Office (AMRO). Manufacturing served as the main growth engine in 2025 for apparel exporters, importers, and sourcing teams, supported by resilient garment exports and sustained foreign direct investment (FDI) inflows despite the introduction of US reciprocal tariffs. AMRO noted in its 2026 Annual Consultation Report (ACR) that Cambodia's economy expanded by 5.3 percent in 2025, outperforming earlier expectations despite multiple shocks, but projected growth to moderate to 4.2 percent in 2026 as higher energy prices and continued border-related disruptions weigh on activity.
Over the past two years, Cambodia has faced an unusually difficult external environment, including trade policy uncertainty, border tensions with Thailand, higher global oil prices, a prolonged property market correction, and pockets of stress in the banking sector. Despite these hurdles, macroeconomic fundamentals remain broadly sound, backed by resilient manufacturing exports, continued FDI, and low public debt. Public debt stayed below 30 percent of gross domestic product (GDP), which preserves policy space if conditions deteriorate further, although the return of nearly one million migrant workers from Thailand added pressure to the labour market before about two-thirds found employment by the end of 2025.
AMRO identified higher global energy prices as the defining macroeconomic challenge for 2026. As a net importer of petroleum products, Cambodia is heavily exposed to rising energy costs; headline inflation is projected to rise from 2.5 percent in 2025 to 5.1 percent in 2026, and the current account deficit is expected to widen from 3.6 percent to 8.5 percent of GDP. Authorities have responded with temporary fuel tax relief and targeted support for vulnerable households, while continued efforts to diversify energy sources, lower electricity costs, and strengthen infrastructure will help reduce exposure to future shocks.
Meanwhile, Cambodia's banking sector has entered a more challenging period characterized by elevated non-performing loans (NPLs)—particularly in real estate-related lending—alongside a small number of bank liquidations and rumour-driven withdrawals. Nonetheless, the banking system remains well capitalized with capital adequacy ratios comfortably above regulatory requirements, and AMRO stress tests indicate sufficient buffers to withstand further asset quality deterioration. Preserving confidence relies on timely communication, orderly resolutions, and strengthened financial safety nets rather than systemic solvency concerns, with authorities introducing asset management institutions (AMIs) and deposit protection frameworks. As Cambodia moves toward upper-middle-income status, implementing structural reforms to enhance energy security, financial resilience, infrastructure, and higher value-added industries will be essential for building a more diversified economy.
