The International Monetary Fund (IMF) concluded its 2024 Article IV mission to Cambodia, providing a comprehensive assessment of the nation’s economic performance and outlook. In its report, the IMF praised Cambodia’s steady economic growth but also underscored several key challenges that the country must address to ensure sustainable development in the face of global economic headwinds.
During the mission, the IMF staff met with high-level Cambodian officials, including representatives from the Ministry of Economy and Finance and the National Bank of Cambodia. These discussions centered around Cambodia’s economic performance in recent years, its fiscal and monetary policies, and the structural reforms needed to maintain its growth trajectory.
According to the IMF’s findings, Cambodia’s economy continues to recover strongly from the disruptions caused by the COVID-19 pandemic, with an estimated growth rate of 6.2% in 2024. The recovery has been supported by robust domestic demand, a resurgence in tourism, and solid performance in key sectors such as manufacturing and agriculture. The IMF noted that Cambodia’s openness to foreign trade and investment has played a crucial role in driving this growth, with the country benefiting from its strategic position in Southeast Asia as a manufacturing hub.
However, the IMF also pointed to significant risks that could impede Cambodia’s long-term economic stability. Chief among these is the global economic environment, which remains volatile due to rising inflation, higher interest rates, and geopolitical tensions. Cambodia’s reliance on exports and external financing leaves it vulnerable to fluctuations in global demand and financial markets. The IMF urged Cambodian authorities to adopt policies that enhance economic resilience, particularly by diversifying its industrial base and improving its financial sector oversight.
The IMF also emphasized the importance of addressing Cambodia’s structural vulnerabilities, including its heavy reliance on the garment industry for exports. While the garment sector has historically been a major driver of growth, the IMF recommended that Cambodia diversify its exports and invest in higher-value industries such as technology and services. Additionally, the report highlighted the need for reforms in education and infrastructure to improve productivity and create a more dynamic workforce capable of adapting to the evolving global economy.
On the fiscal side, the IMF commended Cambodia’s efforts to maintain prudent fiscal policies. Despite the global economic challenges, Cambodia’s government has managed to keep its debt-to-GDP ratio relatively low, thanks in part to careful management of public finances and external borrowing. However, the IMF warned that as the country continues to develop, it will need to enhance its revenue generation capabilities. This could include expanding the tax base, improving tax compliance, and modernizing its tax administration to ensure that the government has the necessary resources to fund critical development projects and social programs.
The IMF also discussed Cambodia’s monetary policy, urging the National Bank of Cambodia to remain vigilant in monitoring inflationary pressures. While inflation has been relatively low in recent years, the IMF noted that rising global food and energy prices could pose a risk. The central bank has been encouraged to ensure that inflation remains within its target range to support economic stability.
In its conclusion, the IMF reaffirmed its support for Cambodia’s economic development efforts and offered several policy recommendations. These include enhancing governance and anti-corruption measures, improving the business environment, and further strengthening financial sector regulation. The IMF also highlighted the importance of social programs aimed at reducing poverty and inequality, noting that while Cambodia has made significant strides in recent years, more work is needed to ensure that the benefits of economic growth are shared broadly across the population.
Looking ahead, Cambodia’s economic outlook remains positive, but risks persist. The IMF’s report underscores the need for continued reforms to strengthen the country’s economic foundations and reduce its exposure to external shocks. Cambodian officials have expressed their commitment to addressing these challenges, with the government outlining a long-term vision focused on economic diversification, infrastructure development, and sustainable growth.
As Cambodia continues to navigate the complexities of the global economy, the IMF’s mission serves as a reminder of the importance of sound economic governance and strategic planning. With the right policies in place, Cambodia has the potential to sustain its impressive growth and enhance its position as a rising economic power in Southeast Asia.
In summary, while Cambodia has made notable progress in its post-pandemic recovery, the IMF’s Article IV mission highlights the need for ongoing vigilance and reform. By addressing both external and internal challenges, Cambodia can continue its path toward long-term economic stability and prosperity.
