After the COVID-19 pandemic, Cambodia’s economy has displayed remarkable resilience and witnessed strong growth since 2022, with a GDP growth rate hovering around 5%. This encouraging uptick can be attributed to the collective efforts of the Cambodian government, which has been diligently steering the nation towards economic recovery and development. In line with this positive trajectory, several organizations have conducted forecasts for Cambodia’s economic growth in 2024, with projections ranging from 5.8% to 6.6%. Notably, the Royal Cambodian Government, through its Ministry of Economy and Finance (MEF), has projected a robust economic growth rate of 6.6% for the year 2024. According to the MEF’s analysis, this anticipated growth will primarily be driven by three key sectors: the Industrial sector, the Service sector, and the Agricultural sector.
Industrial Sector
The industrial sector is projected to experience a growth rate of 8.5%, a significant increase from the 5.0% growth seen in 2023. This growth can be attributed to several factors.
One key driver is the anticipated revival of the garment sub-sector. With the rebound of global demand, particularly from trading partners such as the United States and the European Union, the garment industry is expected to see substantial growth. Additionally, the implementation of the “Cambodia Garment, Footwear, and Travel Goods Sector Development Strategy 2022-2027” is expected to create a favourable investment environment for this industry. However, it is worth noting that the uncertain global economy may have a negative impact on the overall growth of the garment industry.
The non-garment manufacturing sub-sector is also maintaining a strong growth trajectory. This can be attributed to a balanced production approach that caters to domestic demand, as well as optimistic growth in exports. Global demand and Cambodia’s free trade agreements will further contribute to this sector’s growth. Additionally, the “Cambodia Law on Investment” will play a crucial role in attracting investments to support this sector.
On the other hand, the construction sub-sector is experiencing slower growth. This is primarily due to a decrease in foreign direct investment, especially for high-cost construction projects related to tourism and trade. However, housing construction activity is expected to continue growing, albeit at a slower pace.
Service Sector
The service sector is forecast to continue performing well, with a growth rate of 6.9% in 2024, building on a strong performance of 8.1% in 2023. This is due to the ongoing recovery of the domestic economy, particularly in the hotel and restaurant sub-sector, which will have positive spillover effects on other service sub-sectors such as wholesale and retail trade, and transportation and communication.
The hotel and restaurant sub-sector is expected to perform well due to expectations of a rebound in international and national tourists after COVID-19.
The wholesale and retail trade sub-sector is expected to continue growing due to expectations of rising household income and domestic spending, coupled with a shift in business models from traditional brick-and-mortar stores to e-commerce, which will further stimulate domestic consumption.
The transportation and communication sub-sector is also expected to experience sustained growth. This can be attributed to the recovery of tourism and trade activities, as well as the increasing use of the internet and digital technologies in businesses and daily life. The communication sector, in particular, is expected to remain strong due to the growing adoption of digital technologies in Cambodia. The implementation of the “Cambodia Digital Economy and Society Policy Framework 2021-2035” will further support investment in digital infrastructure and promote the use of digital technologies across the country.
However, the real estate sub-sector is expected to see a slower growth rate due to expectations of a slower recovery in foreign direct investment and a low growth in overall property transactions.
Agricultural Sector
The agriculture sector in Cambodia is projected to experience modest growth, with a forecasted rate of 1.1% in 2024, following a growth of 0.9% in 2023. This growth can be attributed to the performance of different sub-sectors within agriculture.
The crop sub-sector is expected to perform well, with projected increases in production. This growth will be driven by various Free Trade Agreements (FTAs), including the Cambodia-China FTA, Cambodia-Korea FTA, and the Regional Comprehensive Economic Partnership (RCEP). Additionally, the government’s support through tax breaks on agricultural input imports and financial incentives to promote domestic production will contribute to the positive performance of this sub-sector.
The fisheries sub-sector is anticipated to recover, primarily due to stricter enforcement of fishing regulations leading to increased freshwater capture fisheries production. Additionally, gradual recovery in aquaculture production is expected, supported by government interventions to address infrastructure challenges, provide financial assistance, and promote the use of high-quality seeds and effective technologies.
The livestock sub-sector, on the other hand, is projected to maintain stability. This stability is driven by the anticipated growth in domestic demand, especially with the recovery of the tourism sector. Furthermore, government interventions and development partner projects will support the stability of this sub-sector.
Cambodia’s economy in 2024 is promising, with projections indicating robust growth across key sectors like industry and services. The garment industry revival, tourism resurgence, and rising domestic consumption paint a bright picture. Even the agricultural sector shows signs of improvement. However, uncertainty in the global economy and potential dips in foreign direct investment could pose challenges. To solidify this positive trajectory, Cambodia will need to mitigate these risks and keep investing in its growth engines. By doing so, Cambodia can turn its economic recovery into a sustainable success story.
Source: Ministry of Economy and Finance. (2024). Budget in Brief.
Photos by: The Better Cambodia | DW | ក្រុមប្រឹក្សាអភិវឌ្ឍន៍កម្ពុជា The Council for the Development of Cambodia
