IMF Executive Board Concludes 2025 Article IV Consultation with Cambodia

Growth is projected to decelerate to 4.8 percent in 2025 and 4.0 percent in 2026, reflecting export volatility, declining remittances, a slowdown in tourism, and weak domestic demand. Inflation is projected to rise modestly in 2025 before easing in 2026. Risks are assessed to be tilted to the downside, with financial sector vulnerabilities at the center. Prudent fiscal and monetary policies, along with structural reforms, are considered essential to safeguard stability and strengthen resilience. Near-term measures are expected to cushion external shocks while supporting medium-term competitiveness.

Washington, DC: On November 21, 2025, the Executive Board of the International Monetary Fund completed the Article IV Consultation for Cambodia. The authorities have consented to the publication of the Staff Report prepared for the consultation.

Economic Developments

Cambodia’s economy continued to accelerate in 2024 and recorded growth of 6.0 percent, supported by a strong rebound in garment and agricultural exports and a continued recovery in tourism. This momentum extended into the first half of 2025, with nowcasting estimates indicating year-on-year growth of 6.2 percent. However, a combination of trade disruptions, border tensions, and slow credit expansion exposed vulnerabilities, and indications of a slowdown are visible in the second half of 2025.

Economic growth is projected to ease to 4.8 percent in 2025 and to around 4.0 percent in 2026. The downward revision from the 2024 Article IV staff report reflects remittance losses and a slowdown in tourism, which are expected to weigh on domestic demand. Tariff effects are anticipated to reduce export earnings as manufacturers face pressure on margins.

Risks are evaluated to be tilted to the downside, driven by financial sector vulnerabilities associated with the series of shocks. Trade policy uncertainty could further affect export growth. Renewed border tensions could weaken confidence, magnifying adverse effects on domestic demand, tourism, and financial sector stability. Elevated private debt, rising NPLs, and governance vulnerabilities could add to risks for financial stability. On the upside, deeper regional trade and investment integration could support export growth. Successful reintegration of returned workers into the domestic labor market could contribute to a stronger recovery in domestic demand.

Executive Board Assessment

Executive Directors agreed with the thrust of the staff appraisal. They noted that while Cambodia’s economy grew strongly in 2024, the recovery remains uneven and is slowing, affected by subdued domestic demand, border tensions, trade disruptions, and a real estate correction. Directors also cautioned that risks are inclined to the downside and observed that Cambodia’s growth model remains vulnerable owing to reliance on a narrow export base. They urged the authorities to safeguard macroeconomic stability and reinforce resilience through coordinated fiscal, monetary, and structural policies.

Fiscal Policy

Directors agreed that fiscal policy should cushion the impact of ongoing shocks while maintaining fiscal prudence. They highlighted the importance of temporary and targeted support for vulnerable households and displaced workers, together with active labor market policies. Over the medium term, gradual and growth-friendly consolidation is viewed as necessary to rebuild buffers and preserve fiscal sustainability. Directors also emphasized the importance of revenue mobilization and acknowledged efforts to improve expenditure efficiency and infrastructure governance.

Monetary Policy

Directors stated that monetary policy should remain agile and responsive to evolving conditions. They encouraged the authorities to move gradually toward normalization, including restoring reserve requirements to pre-pandemic levels, while continuing work to strengthen monetary transmission in Khmer Riel and improve liquidity management. Directors welcomed ongoing modernization of the policy framework and underscored the significance of transparent communication for enhancing policy credibility.

Financial Sector Policies

Directors agreed that financial sector policies should center on managing rising risks and strengthening oversight. They supported the phase-out of forbearance by end-2025 to enable timely recognition of distressed assets and recapitalization. Directors stressed the need to strengthen supervisory capacity, including asset quality reporting, stress testing, and early intervention. They encouraged reforms to insolvency and crisis management frameworks, the establishment of a deposit insurance scheme, and additional efforts to address AML/CFT vulnerabilities.

Structural Reforms

Directors highlighted the urgency of advancing structural reforms to diversify exports, enhance productivity and competitiveness, and improve trade facilitation. They noted that governance reforms are essential for improving the business environment, bolstering investor confidence, and supporting sustainable and inclusive development. Directors also encouraged continued efforts to address data limitations.