Over the past two years, Cambodia has faced an unusually challenging external environment. Trade policy uncertainty, border tensions with Thailand, higher global oil prices, a prolonged property market correction, and pockets of stress in the banking sector have tested one of ASEAN’s fastest-growing economies.

Yet, Cambodia has continued to demonstrate considerable resilience.

According to AMRO’s 2026 Annual Consultation Report (ACR), Cambodia’s economy expanded by 5.3 percent in 2025, outperforming earlier expectations despite multiple shocks. Growth is projected to moderate to 4.2 percent in 2026, as higher energy prices and continued border-related disruptions weigh on activity. While the near-term outlook has become more challenging, Cambodia’s macroeconomic fundamentals remain broadly sound, supported by resilient manufacturing exports, continued foreign direct investment (FDI), and low public debt.

This year’s ACR points to three priorities that will shape Cambodia’s next stage of economic development.

Resilience is being tested

Cambodia’s economy has entered a new phase. Rather than rebounding from a single crisis, it is adapting to repeated external shocks that are becoming a more permanent feature of the global economy.

Manufacturing remained the main engine of growth in 2025, supported by resilient garment exports and sustained FDI inflows despite the introduction of US reciprocal tariffs. Tourism, construction, and real estate, however, continued to recover more gradually. The return of nearly one million migrant workers from Thailand also placed additional pressure on the labor market, although about two-thirds had found employment by the end of 2025.

Importantly, public debt remained below 30 percent of GDP, preserving valuable policy space to respond should conditions deteriorate further.

The outlook for 2026 is expected to soften as higher oil prices weigh on household purchasing power, domestic demand and the external balance. Cambodia’s experience over the past two years nevertheless offers an important lesson: resilience is no longer measured simply by how fast an economy grows, but by how well it adapts to an increasingly uncertain world.

The energy shock exposes a structural vulnerability

Among the various headwinds facing Cambodia this year, higher global energy prices have emerged as the defining macroeconomic challenge.

As a net importer of petroleum products, Cambodia is particularly exposed to rising energy costs. Headline inflation is projected to increase from 2.5 percent in 2025 to 5.1 percent in 2026, while the current account deficit is expected to widen from 3.6 percent to 8.5 percent of GDP.

The authorities have responded with temporary fuel tax relief and targeted support for vulnerable households. More fundamentally, however, the latest energy shock reinforces an important policy lesson: energy security is now a macroeconomic imperative.

Continued efforts to diversify energy sources, lower electricity costs, and strengthen energy infrastructure will reduce Cambodia’s exposure to future external shocks while supporting longer-term industrial development. As the country advances toward upper-middle-income status, reliable and affordable energy will increasingly determine its competitiveness as an investment destination.

Confidence remains the foundation of financial stability

Cambodia’s banking sector has also entered a more challenging period. Elevated non-performing loans (NPLs), particularly in real estate-related lending, together with a small number of bank liquidations and episodes of rumor-driven withdrawals, have underscored the importance of maintaining public confidence.

The banking system nevertheless remains well capitalized. Capital adequacy ratios are comfortably above regulatory requirements, and AMRO’s stress testing indicates that banks retain sufficient buffers to withstand further deterioration in asset quality. The principal challenge is therefore not one of systemic solvency, but of preserving confidence through timely communication, orderly resolution of distressed institutions, and continued strengthening of the financial safety net.

The authorities have already taken important steps, including introducing frameworks for asset management institutions (AMIs) and deposit protection, as well as revising the emergency liquidity assistance framework. Priority should be given to accelerating NPL resolution through effective AMIs and more efficient court procedures. Close coordination among financial authorities will also remain essential to ensure that temporary confidence shocks do not evolve into broader financial instability.

Looking ahead

Cambodia enters the second half of 2026 facing its most challenging external environment since the pandemic. Yet the country’s macroeconomic foundations remain intact. Low public debt, resilient manufacturing exports, continued FDI inflows, and proactive policymaking provide important buffers against an increasingly uncertain global backdrop.

The broader message from AMRO’s 2026 ACR is therefore one of cautious optimism. Cambodia’s recent experience shows that resilience is not simply about weathering today’s shocks; it is about building the capacity to manage tomorrow’s uncertainties.

As Cambodia advances toward upper-middle-income status, continued structural reforms—including strengthening energy security, enhancing financial system resilience, improving infrastructure, and promoting higher value-added industries—will be essential to building a more diversified, productive, and resilient economy.