Public Disclosure Authorized

November 2023
Public Disclosure Authorized
Public Disclosure Authorized
Public Disclosure Authorized

FROM RECOVERY
TO REFORM
SPECIAL FOCUS
Accelerating structural reforms
to boost productivity and competitiveness
 Cambodia Economic Update
November 2023

FROM RECOVERY
TO REFORM
SPECIAL FOCUS
ACCELERATING STRUCTURAL REFORMS
TO BOOST PRODUCTIVITY
AND COMPETITIVENESS
 TABLE OF CONTENTS

ACKNOWLEDGMENTS.................................iii Pressure on domestic interest rates intensified..... 21

ABBREVIATIONS............................................. iv Credit growth sharply eased, but concentration of
credit in real estate continued............................... 21

Domestic revenue collection slowed .................... 22

Part 1. Recent Economic Developments and
Outlook................................................................ 1
Budget expenditures continued to increase ......... 22
EXECUTIVE SUMMARY..................................... 1
Cash transfer programs continued ....................... 22
Recent developments .............................................. 1
The overall fiscal deficit has widened.................... 23
Outlook....................................................................... 2
Public debt stock reached 33.1 percent of GDP . 24
Challenges and risks................................................. 2
Outlook..................................................................... 25
Policy options............................................................. 3
Challenges and risks............................................... 25
Recent developments Economic activity is slower
Policy options........................................................... 27
than previously anticipated .................................... 6

International arrival numbers accelerated ............. 7

Part 2. Special focus
Goods exports weakened as garment, travel goods, Accelerating structural reforms to boost
and footwear exports eased...................................... 9 productivity and competitiveness.................... 29

The number of manufacturing jobs shrank as Introduction........................................................... 30

garment, travel goods, and footwear employment
declined................................................................... 10 There have been limited contributions to economic
growth from productivity and only modest
Approved FDI slowed............................................ 11 improvements in international competitiveness .31

Approved property development permit value Despite recent progress, the business environment
continued to expand ............................................. 13 for firms in Cambodia remains challenging ........ 33

Crop production accelarated................................. 15 Similarly, despite recent progress, major

Agricultural export performance is mixed........... 16
Private consumption eased as pent-up domestic
demand is running out of steam........................... 17
infrastructure gaps persist..................................... 35
Finally, progress on building human assets has
been modest and mixed, with significantly more
reform needed to move the needle ....................... 37

Inflation edged up, due to the recent uptick in oil

and food prices ...................................................... 18
Recommendations............................................. 40
The current account balance improved as imports
Annex. Cambodia – Selected Indicators.......... 43
moderated............................................................... 19
Bibliography....................................................... 45
The exchange rate remained under pressure........ 19

Broad money growth continued to decelerate..... 20

i Cambodia Economic Update November 2023

BOXES
Box 1. Global economic developments
and outlook ..............................................................19
Box 2. The Pentagonal Strategy Phase 1.................21
Box 3. Summary of Incentives in Implementing
the Sub-decree of the 2021 Investment Law............23
FIGURES
FIGURE ES.1. CAMBODIA’S RECENT
DEVELOPMENTS AT A GLANCE.................... 13
Figure 1. Economic recovery continued
Contribution to real GDP growth.......................... 14
Figure 2. Eight-month arrival and tourism
receipts ..................................................................... 14
Figure 3. Air arrivals remained relatively
subduedArrivals by mode of transport................... 15
Figure 4. Accommodation supply......................... 15
Figure 5. Contribution to export growth by
market....................................................................... 16
Figure 6. Contribution to export growth by
products.................................................................... 16
Figure 7. Manufacturing sector’s jobs and
factories..................................................................... 17
Figure 8. Garment, travel goods, and footwear
jobs ........................................................................... 17
Figure B.1.1. Purchasing Managers’ Indexes........ 19
Figure B.1.2. Global growth and trade................. 19
Figure 9. Tradable sector investment projects....... 20
Figure 10. Approved FDI-financed project by
sector......................................................................... 20
Figure 11. Approved property project permits..... 22
Figure 12. Approved permit area by property
type........................................................................... 22
Figure 13. Imports of consumer and durable
goods ........................................................................ 24
Figure 14. Inflation edged up................................ 24
Figure 15. The current account improved............ 25
Figure 16. The riel appreciated against regional
currencies.................................................................. 25
Cambodia Economic Update November 2023
TABLES
Table ES1. Macro outlook .....................................10
Table 2. The macro outlook indicates continued
economic recovery.....................................................34
Table S.1. Summary of the challenges and
recommendations .....................................................49
Figure 17. Broad money growth eased.................. 26
Figure 18. U.S. interest rates increased.................. 26
Figure 19. Domestic interest rates were under
increased pressure .................................................... 28
Figure 20. Concentration of credit in real estate .... 28
Figure 21. Central government domestic revenue.... 29
Figure 22. Central government expenditure......... 29
Figure 23. General government operations........... 31
Figure 24. General government surplus/deficit
and financing............................................................ 31
Figure S.1. Overview of economic growth and
poverty reduction over the past decade................... 38
Figure S.2. Contributions to economic growth
over the past decade ................................................ 39
Figure S.3. Structural changes in the Cambodian
economy ................................................................... 40
Figure S.4. Progress on global competitiveness
over the past decade.................................................. 41
Figure S.5. Progress on reducing firm costs .......... 41
Figure S.6. Private sector perceptions ................... 42
Figure S.7. Provision of government online
services...................................................................... 42
Figure S.8. Progress on boosting investment in,
and provision of, infrastructure .............................. 43
Figure S.9. Progress on building human capital
over the past decade ................................................. 45
Figure S.10. Progress on access to education and
learning outcomes.................................................... 46
Figure S.11. Overall progress on upskilling
Cambodia’s workforce ............................................ 47
ii
 ACKNOWLEDGMENTS
The November 2023 Cambodia Economic Update (CEU) was prepared by Sodeth Ly, Faya Hayati, Tim L.
De Vaan, Sagita Muco, and Kim Alan Edwards, with contributions from Samuel Christopher Hill and Kimsun
Tong. Chankesey Heav served as a research assistant. Seakheang Heng provided administrative support. Saroeun
Bou helped with the press release, web display, and dissemination events.
The team worked under the overall guidance of Sebastian Eckardt. The team is grateful for the advice and
comments provided by Lalita M. Moorty, Mariam Sherman, and Maryam Salim. Several colleagues, including
Aaditya Mattoo and Ergys Islamaj, provided comments on the draft version.
The team is grateful to the Cambodian authorities, particularly the Ministry of Economy and Finance and the
National Bank of Cambodia, for their cooperation and support. The report also benefited from the advice,
comments, and views of various stakeholders in Cambodia, including its enthusiastic readers and critics.
The CEU, produced biannually, provides up-to-date information on macroeconomic developments in
Cambodia. It is distributed and discussed widely, including among Cambodian authorities, development
partners, the private sector, think tanks, civil society organizations, and academia.
For information about the World Bank and its activities in Cambodia, please visit our website at www.worldbank.
org/cambodia.
To be included in the email distribution list of the CEU and related publications, please contact Seakheang Heng
(sheng4@worldbank.org). For questions on the contents of this publication, please contact Saroeun Bou (sbou@
worldbank.org).
The findings, interpretations, and conclusions expressed in this report do not necessarily reflect the views of the
Executive Directors of the World Bank or the governments they represent. The World Bank does not guarantee
the accuracy of the data included in this work. The boundaries, colors, denominations, and other information
shown on any map in this work do not imply any judgment on the part of the World Bank concerning the legal
status of any territory or the endorsement or acceptance of such boundaries.

iii Cambodia Economic Update November 2023

ABBREVIATIONS
ASEAN Association of Southeast Asian Nations
CEU Cambodia Economic Update
COVID-19 coronavirus disease 2019
CPI Consumer Price Index
CSES Cambodia Socio-economic Survey
EAP East Asia and Pacific region
EU European Union
FDI foreign direct investment
GDP gross domestic product
GTF garment, travel goods, and footwear
HDI Human Development Index
ICT information and communication technologies
MEF Ministry of Economy and Finance
NBC National Bank of Cambodia
QIP qualified investment project
SCD Systematic Country Diagnostic
SMEs small and medium-sized enterprises
TFP total factor productivity
UN United Nations
U.S. United States
US$ United States dollar
VAT value-added tax
y/y year on year

Cambodia Economic Update November 2023 iv

 Photo: kim-eang-eng @unsplash

PART 1.
RECENT ECONOMIC
DEVELOPMENTS
AND OUTLOOK

EXECUTIVE SUMMARY
Recent developments
This year’s economic activity has been slower
than previously anticipated due to emerging
structural bottlenecks and continued external
headwinds. This has prompted a sense of urgency
to address the rising economic challenges to
sustain growth in the short to medium term. While
Cambodia’s structural slowdown started well
before the pandemic, it had been masked for several
years by rapid capital inflows, mainly from China,
fueling a construction boom until COVID-19 hit.
The structural challenges are now exposed, hurting
economic activity, which is also being impacted
by global headwinds. Despite a rapid expansion
of public investment in physical infrastructure,
shortcomings in Cambodia’s transportation network
and logistics performance remain, and the country
continues to face high costs and low reliability of
energy supply. The country is ranked low among East
Asian countries in terms of ease of doing business,
investment climate, and competitiveness, due in part
to its difficulties in promoting good governance.
The slowdown was broad-based. Despite a
relatively strong rebound in international arrivals,
tourism activity and receipts have proven to be
sluggish. Construction and real estate activity also
remained subdued, as reflected in weak imports
of basic construction materials used in property
development as the housing market correction
continued, due to a significant increase in supply and
persistent macroeconomic headwinds. However, as
an initial signs of renewed investor appetite, the value
of approved property development permits increased
sharply, almost doubling from a year ago. In contrast,
the value of approved investment (outside special
economic zones) under the qualified investment
project (QIP) scheme, which receives fiscal incentives
for investing in the tradable sectors, remained
subdued, reaching US$1.16 billion or a 7.3 percent
y/y decline as the negative impacts of the external
demand slowdown continued.
Cambodia’s merchandise exports have weakened.
During the first eight months of 2023, goods exports
shrank by 2.0 percent. Merchandise imports have also
moderated as gold imports plummeted, narrowing
the current account deficit, despite weaker exports.
This helped ease pressure on the exchange rate,
which remained broadly stable, hovering at 4,100
Cambodia Economic Update November 2023
Cambodian riel per U.S. dollar. As food and oil prices
inched up, inflation marginally increased, reaching
3.2 percent y/y in August 2023, up from 2.8 percent
at end-2022. Gross international reserves improved
to US$18.5 billion in August 2023, up from US$17.7
billion at the end of 2022, covering about seven
months of imports.
Credit growth declined to 7.7 percent y/y in
August 2023 – a 20-year low, and a pronounced
slowing from 22.7 percent during the same
period in 2022 – further constraining domestic
consumption. Since the economy is highly dollarized,
Cambodia “imports” U.S. monetary policy. Global
financial conditions have become restrictive as a
consequence of the fastest global monetary policy
tightening cycle since the 1980s. Consequently, the
central bank has also started to tighten its monetary
policy by raising the reserve requirement, one of a few
monetary policy instruments available to influence the
money supply, given the economy is highly dollarized.
The reserve requirement ratio for foreign currency of
banks and financial institutions was raised to 9 percent
in January 2023, up from 7 percent, reportedly to
maintain the resilience of the banking and financial
sector. Broad money eased, growing at 11.0 percent
in August 2023, down from 12.0 percent during
the same period in 2022, as foreign currency deposit
growth slowed. Private sector deposit growth also
decelerated, growing at 11.1 percent, down from 14.2
percent during the same period in 2022. According
to the midyear 2023 report of the National Bank of
Cambodia, the reported nonperforming loan ratios
for the banking and microfinance sectors were 4.0
percent and 3.1 percent, respectively, by mid-2023,
up from 3.2 percent and 2.6 percent, respectively, by
the end of 2022.
After a strong recovery in 2022, government
revenue collection has slowed this year. As gains
from revenue administration improvements may
have already peaked and cyclical slowdown amid
slower economic activity continued, direct revenue
collection moderated. Similarly, taxes on goods and
services, especially excises and duties on imports,
declined as goods imports and consumption shrank.
Taxes on international trade also eased amid weakening
trade. During the first eight months of 2023, central
government domestic revenue plateaued, growing
at 0.4 percent y/y, down from 23.8 percent during
the same period in 2022. Central government
expenditure growth, however, accelerated to 12.7
percent y/y, due mainly to rising operating expenses
1
 that include an across-the-board public sector wage inflation are expected to continue to affect the
increase, an increase in goods and services expenses, economy. In this context, the economy is projected
general election-related spending, and the hosting of to continue to grow at a slower pace than earlier
the Southeast Asian Games and the Association of projected, expanding at 5.8 percent and 6.1 percent
Southeast Asian Nations (ASEAN) Para Games, as in 2024 and 2025, respectively. Despite this year’s
well as a capital spending boost. Government deposits improvement in approved property development
(fiscal reserves) marginally declined to 21.3 trillion riel permit value, prospects of the real estate sector
(US$5.1 billion) or 16.0 percent of GDP in August continue to remain uncertain, given high debt and
2023, down from 21.9 billion riel (US$5.3 billion) or tighter financing conditions. Although economic
17.8 percent of GDP in 2022. growth is forecast to be lower than previously
expected, the pace of poverty reduction is projected
The labor market has been affected by subdued to accelerate, but it is highly unlikely to reach the pre-
goods exports. As a result, jobs in the (formal) pandemic level.
manufacturing sector, an important source of paid
employment, accounting for 18 percent of nonfarm In the medium to longer term, real growth is
payroll, shrank from 1.05 million in July 2022 to 1.0 expected to trend back to potential, reaching 6
million in May 2023, before partly recovering to 1.02 to 7 percent, driven by stronger exports and FDI
million in August 2023. This represents a 5 percent inflows facilitated by the newly ratified free trade
decline in manufacturing sector jobs, prompting the agreements, a substantial increase in private and
authorities to provide financial support to laid-off public investment in key physical infrastructure, and
workers. Similar financial support in the form of a structural reforms.
“wage subsidy”, one of several assistance measures,
was provided during the time of COVID-19. Among Table ES1. Macro outlook
all social assistance programs, the COVID-19 cash (percent of GDP unless otherwise indicated)
transfer program has been the largest. Since its
launch in June 2020, the program has disbursed Change from May
Projections
US$1.2 billion as of September 2023. Moreover, the 2023
government has doubled its conditional cash transfer
2023 2024 2025 2023 2024 2025
program to approximately US$380 for each pregnant
woman bearing one child up to the age of two with Real growth
5.4 5.8 6.1 -0.1 -0.3 -0.2
IDPoor cards from August 2023. This assistance (percent)
program has also expanded its coverage to include
CPI (period
female workers who are members of the National average, percent)
3.0 2.8 2.7 0.5 0.3 0.7
Social Security Fund, female civil servants, and intern
and contract government officials. The increase in Current accounts -13.4 -11.5 -9.6 5.9 4.6 3.6
cash aid and their coverage expansion serves to further
alleviate the negative impacts experienced by poor Overall fiscal
-6.9 -4.8 -3.2 -0.5 0.1 1.0
and vulnerable households. deficit

Public external
36.9 36.3 35.6 1.8 0.7 -0.3
Outlook debt

Cambodia’s real GDP growth is projected to

reach 5.4 percent in 2023, marginally lower than
5.5 percent projected in May 2023 (see table
ES1) as domestic demand eased and the external
demand slowdown continued. This year’s fiscal
deficit is expected to widen to 6.9 percent of GDP, up
from 4.8 percent of GDP in 2022.
In the short term, the overlapping negative
shocks of the pandemic, Russia’s invasion of
Ukraine, and the sharp tightening of monetary
policy in major economies to contain high
Challenges and risks
The outlook is, however, subject to substantial
downside risks. Major downside risks pertain
to weaker-than-expected global demand further
constraining the country’s goods exports, tighter
global financial conditions affecting the highly
leveraged financial sector, and renewed oil and
food price shocks negatively impacting domestic
consumption. Domestically, rising household
debt and the continued concentration of domestic

2 Cambodia Economic Update November 2023

credit in the real estate sector remain key risks to
financial stability. In addition, fiscal-monetary policy
coordination in Cambodia remains a challenge.
While countercyclical fiscal policy continued,
tightening monetary policy has already begun. A
growth shock originating in the region’s largest
trading partners, China, and the U.S. would impact
economic performance in the East-Asia and Pacific
(EAP) countries including Cambodia through
bilateral trade and financial flows, including foreign
direct investment (FDI).
Further tightening of global financial conditions,
especially surging global interest rates, could
worsen investment in the tradable sectors and
severely affect the highly leveraged banking
system. Global growth, especially global trade,
could be even weaker than anticipated, worsening
manufacturing exports, currently providing about 1
million jobs (18 percent of nonfarm employment)
in the event of widespread financial sector stress
or if more persistent inflation pressures prompt
tighter-than-expected monetary policy. Worsening
geopolitical tensions, conflict and social unrest, and
natural disasters stemming from climate change,
continue to present downside risks in many emerging
and developing economies, including Cambodia.
Policy options
An acceleration of the key structural reforms
envisaged under the 2023–28 Pentagonal
Strategy is needed to ensure sustainable growth
over time. As discussed in the Special Focus section,
Cambodia’s strong economic growth over the past
decade was largely driven by factor accumulation,
with limited contributions from productivity.
Structural transformation has slowed since 2016, and
recent years have seen only modest improvements
in the economy’s international competitiveness. To
avoid a future slowdown in economic growth and
poverty reduction, Cambodia needs to transition
to a more sustainable pattern of growth through
further structural reform. In particular, lifting the
contributions to growth from productivity and
human capital will require reforms to the business
environment and larger, higher quality investments
in infrastructure and in education and skills.
Furtherimprovementstothebusinessenvironment
are critical for boosting the productivity and
competitiveness of Cambodian firms. The cost of
doing business remains relatively high in Cambodia,
Cambodia Economic Update November 2023
reducing international competitiveness and inhibiting
innovation and shifts into higher value-added activities.
To help support increased private sector investment,
Cambodia needs to strengthen the predictability of
the regulatory environment and expand SME access
to finance. Further efforts to streamline complex and
restrictive business entry requirements, together with
improvements to the functioning of the insolvency
framework, would help reduce costs of firm entry and
exit. Simplifying and digitalizing business services,
especially the issuance of licenses and permits, would
reduce the associated costs. More competition would
foster cost reductions and innovation and promote
productivity growth by shifting market share toward
more efficient producers and incentivizing firms to
become more efficient. To support the tourism sector,
a reduction of costs and fees (visa, accommodation,
food, transport, and entrance fees) – including
elimination of unofficial fees – would help attract
international arrivals.
Upgrading Cambodia’s infrastructure is also
an important foundation for productivity
and international competitiveness. Cambodia
continues to have a large infrastructure financing
gap, resulting in inadequate infrastructure services
that are struggling to keep up with rapidly growing
demand. Large investments are needed in the energy
sector to address the dual challenge of meeting rapid
growth in electricity demand while meeting the
country’s climate change commitments. Investments
are also needed to upgrade basic urban services such
as piped water, sanitation, solid waste management,
telecommunications, and transport, in conjunction
with strengthened urban planning.
Moreover, gaps in regional connectivity
impact the efficiency and cost of cross-border
trade and need to be addressed. Investments are
needed to address specific infrastructure gaps in
domestic and regional transport connectivity: to
improve the East-West corridor across Thailand,
Cambodia, and Vietnam (and the only road
corridor connecting Cambodia with Lao PDR);
to improve the inland waterway connection with
Vietnam; and to improve the existing railway
operations and infrastructure links with Thailand.
It is also important to improve trade facilitation
and logistics performance. Further efforts must
be made to reduce transport and logistics costs by
monitoring the efficiency of main trade gateways
such as ports and border checkpoints.
3
 Raising learning outcomes is crucial to
address skills shortages, develop a “future-
ready” workforce, and drive Cambodia’s
future productivity growth. Firms are reporting
growing skills shortages, and labor productivity
growth has declined sharply over the past five
years. Few young Cambodian children are being
enrolled in early childhood education, which is
undermining early development and hindering
mothers from returning to work. Primary schools
are experiencing a decline in learning outcomes
despite improved access. Few students are
progressing to secondary school and those that do
are often inadequately prepared and experience
high dropout rates. Options for post-secondary
learning are limited and are of low quality. Finally,
the dynamism of the labor market is limited by
insufficient supply and demand information.
In addition to these structural reforms to
promote sustainable growth, maintaining
macro-fiscal stability continues to be a priority.
Further effort is needed to restore fiscal space,
including through reforms to curb tax holidays and
exemptions, and to broaden the corporate income
tax base and strengthen compliance. Tax and customs
administration systems can be modernized to make it
easier to pay taxes and duties.
4 Cambodia Economic Update November 2023
It is also critical to safeguard financial stability,
given Cambodia’s highly leveraged banking
sector. To safeguard financial stability, the immediate
focus should be on intensified bank supervision:
stress testing of individual institutions, systematic
onsite inspections, further alignment of the
regulatory framework with international standards,
and thorough assessments of the quality of loan
portfolios, among others. To prepare for increasing
levels of nonperforming loans, it is crucial to ensure
that resolution options are now ready to be deployed
as needed, and to strengthen the country’s insolvency
regime. Efforts to prepare legislation on deposit
insurance and bank resolution must continue.
Finally, improving public sector performance is
necessary to create an institutional environment
which strengthens service delivery and supports
rather than hinders the development of the
private sector. Key public administration reforms
include: (i) strengthening the quality and effectiveness
of public service delivery, including the development
of organizational performance indicators and a system
for regular high-level reporting and monitoring of
performance; (ii) optimizing organizational structures
and reforming back-office and support functions
across government; and (iii) strengthening the
meritocratic approach to civil service employment,
and reforming pay and compensation, including by
linking worker performance with pay increases.
Photo: Silver Ringvee @unsplash
 FIGURE
FIGURE
ES.1. ES.1.
CAMBODIA’S
CAMBODIA’S
RECENTRECENT
DEVELOPMENTS
DEVELOPMENTS
AT A GLANCE
AT A GLANCE

Economic
Economic FIGURE
growthgrowthslowerFIGURE ES.1.earlier
slower
than ES.1.
CAMBODIA’S
than CAMBODIA’S
anticipated
earlier RECENT
… RECENT
anticipated … DEVELOPMENTS
DEVELOPMENTS
… supported ATbyArecovery
… supported AT
GLANCE
byA recovery
GLANCE
of services
of services
… …
FIGURE FIGURE ES.1.ES.1. CAMBODIA’S
CAMBODIA’S RECENT
RECENT DEVELOPMENTS
DEVELOPMENTS AT A AT A GLANCE
GLANCE
FIGURE ES.1. CAMBODIA’S
Real growth
Real growth
(percent) RECENT
(percent) DEVELOPMENTS AT A GLANCE
International
International
arrivals
(million
arrivals
(million
) )
Economic
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growth growth
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anticipated
anticipated
… … … supported
… supported by recovery
by recovery
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Pre-COVIDgrowth
Real
Pre-COVID was
growth
historical Realslower
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historical
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International
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International
arrivals
(million
arrivals
(million
) )…
Real growth
Real growth (percent) (percent) International
International arrivals
arrivals (million
(million) )
Real
GDPgrowth
growth
GDP (percent)
growth International
Pre-COVIDarrivals
Pre-COVID (million)
historical
historical
average (5
average
years)(5 years)
10.0 10.0
Pre-COVID
Pre-COVID
historical
historical
average average
(5 years)(5 years) ArrivalsArrivals
(million)(million)
Pre-COVID
Pre-COVID historical
historical average
average (5 years)
(5 years) 0.8 0.8 Arrivals (million)
GDP growth
GDP growth Arrivals
Pre-COVID (million)
Pre-COVID
historical
historical
average average
(5 years)(5 years)
8.0
10.0 8.0GDPGDP
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growth 6.1 6.1 0.7 Pre-COVID
0.7 Pre-COVID historical average (5 years)
10.0 5.8 5.8 historical average (5 years)
10.0 0.8 0.8
6.0 6.0 5.4 5.46.1 0.60.8 0.8
0.6
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20212023p
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2011 2011
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2013 2015
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2014 2016
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2015 2017
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2016 2018
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2017 2019
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2018 2020
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2019 2021
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2020 2022
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2021
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Jan-19 Jan-19

Jul-19 Jul-19
Jul-19 Jan-19

Jan-20 Jul-19
Oct-19Oct-19

Apr-20 Oct-19
Jul-19 Jan-20
Oct-19Apr-20
Jul-20 Jul-20
Jul-20 Jan-20
Oct-20Oct-20
Oct-20 Apr-20
Jul-20 Jan-21
Jan-21 Jul-20
Oct-20Apr-21
Apr-21 Oct-20
Jul-21 Jul-21
Jul-21 Jan-21
Oct-21Oct-21
Oct-21 Apr-21
Jul-21 Jan-22
Jan-22 Jul-21
Oct-21Apr-22
Apr-22 Oct-21
Jul-22 Jul-22
Jul-22 Jan-22
Oct-22Oct-22
Oct-22 Apr-22
Jul-22 Jan-23
Jan-23 Jul-22
Oct-22Apr-23
Apr-23 Oct-22
Jul-23 Jul-23
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Apr-23Apr-23
Jul-23 Jul-23
Apr-19Apr-19

Oct-19 Apr-19
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2012
2013
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Jan-20
Apr-20
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Apr-20
Jan-21
Apr-21
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Jan-22
Apr-22
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Jan-23
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2020
2021
2022

Jan-19

Jul-19
Oct-19
Jan-20
Apr-20
Jul-20
Oct-20
Jan-21
Apr-21
Jul-21
Oct-21
Jan-22
Apr-22
Jul-22
Oct-22
Jan-23
Apr-23
Jul-23
Apr-19
2023p
2024p
2025p
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

Jan-19
Apr-19
… despite
… despite
the decline
the decline
in goods in exports
goods exports continued…
continued… …inflation
…inflation
edged up…edged up…
GoodsGoods
exportsexports
(YTD,(YTD,y/y percent
y/y percent
change)change) (y/y percent
(y/y percent
change)change)
… despite
… despite
the decline
…Despite the decline
continued in goodsin goods
declineexportsexports
in goods continued…
continued… …inflation
up……inflation edged edged
up… up…
… despite
… despite the the decline
decline in in goods
goods exportsexports
exports
…
continued…
continued…
…Inflation edged …inflation
…inflation edged up…
Goods Goods
Pre-COVID Goods
exports exports
Pre-COVID exports
historical
(year (YTD, (YTD,
historical
to average
date, y/y
(5 percent
average
y/y years)y/y percent
change)
(5 years)
percent change) change) Headline
(y/y percent Headline
inflation
change) (y/yedged
(y/yinflation
percent
(y/y) percent
(y/y) up…
change) change)
Exports
Goods
Goods
Exports
exports
exports (YTD, (YTD, y/y percent
y/y percent change)
change) Pre-COVID
Pre-COVID
(y/y percent
(y/yhistorical
historical percent change)
change)
average (10
average
years)(10 years)
Pre-COVID
Pre-COVID
historical
historical
average average
(5 years)(5 years) 9 9Headline
Headline
inflationinflation
(y/y) (y/y)
50 50 Pre-COVID
Pre-COVID historical average (5 years) Headline inflation (y/y)
ExportsExportshistorical average (5 years) 8 8 Headline
Pre-COVID inflation
historical
Pre-COVID (y/y)
average average
historical (10 years)
(10 years)
40 Exports
40 Exports Pre-COVID historical average (10 years)
9 9 Pre-COVID historical average (10 years)
50 50 7 97
3050 50
30 8 9 8
40 40 6 86
40 7 8 7
2040 20 5
30 30 7 75
1030 30
10 6 6
4 64
20 20 5 6 5
0 200 3 53
1020 10 4 5 4
-1010 10
-10 2 42
0 0 3 4 3
-20 0 0
-20 1 31
2 3 2
-10 -10 0
-30-10 -10
-30 2 20
1 1
May-15

Jul-16 May-15

May-22

Jul-23 May-22
Jan-13Mar-14

Mar-14

Jun-19

Aug-20 Jun-19
Jan-20Mar-21

Mar-21
Jul-16 Jul-16

Sep-17 Jul-16

Jul-23 Jul-23

Jul-23 Jul-23
Aug-13Aug-13

Oct-14Aug-13

Aug-20

Oct-21Aug-20
Feb-17Apr-18

Jun-19Apr-18
Jan-13Jan-13

Mar-14 Jan-13

Jan-20

Mar-21 Jan-20
Oct-14

Dec-15 Oct-14

Oct-21

Dec-22 Oct-21
-20 -20
Nov-18

Jan-20 Nov-18
Jul-16Sep-17

Nov-18 Sep-17
Oct-14Dec-15

Feb-17Dec-15

Oct-21Dec-22

Dec-22Dec-22
Feb-17

Apr-18 Feb-17

1
Jul-23 Jul-23

Jul-23 Jul-23
Jul-22 Jul-22

Jul-22 Jul-22
Jul-20 Jul-20

Jul-20 Jul-20

Jul-21 Jul-21

Jul-21 Jul-21

Apr-22Apr-22

Apr-22Apr-22

Apr-23Apr-23

Apr-23Apr-23
Apr-20Apr-20

Apr-20Apr-20

Apr-21Apr-21

Apr-21Apr-21

Jan-22Jan-22

Jan-22Jan-22

Jan-23Jan-23

Jan-23Jan-23
Jan-20Jan-20

Jan-20Jan-20

Jan-21Jan-21

Jan-21Jan-21

Oct-22Oct-22

Oct-22Oct-22
Oct-20Oct-20

Oct-20Oct-20

Oct-21Oct-21

Oct-21Oct-21

-20 0 1 0
-30-20 -30 0
0
May-15

May-15

May-22

May-22
Mar-14

Mar-14

Jun-19
Mar-21

Mar-21
Aug-13

Aug-20

Aug-20
Apr-18

Apr-18
Jan-20

-30
Nov-18

Nov-18
Sep-17

Sep-17
Dec-15

Dec-15

Dec-22
-30
May-15

May-22
Mar-14

Jun-19

Mar-21
Jul-16

Jul-23
Aug-13

Aug-20
Apr-18
Jan-13

Jan-20
Oct-14

Oct-21
Nov-18
Sep-17
Dec-15

Dec-22
Feb-17
May-15

May-22
Jun-19
Aug-13
Jan-13

Oct-14

Oct-21
Feb-17
Jul-23
Jul-22
Jul-20

Jul-21

Apr-22

Apr-23
Apr-20

Apr-21

Jan-22

Jan-23
Jan-20

Jan-21

Oct-22
Oct-20

Oct-21

Jul-23
Jul-22
Jul-20

Jul-21

Apr-22

Apr-23
Apr-20

Apr-21

Jan-22

Jan-23
Jan-20

Jan-21

Oct-22
Oct-20

Oct-21

…Broad
… broad … money (M2) growth
broad money growth decelerated…
(M2) growth decelerated
decelerated
… … …Domestic revenue …slowed
… domesticdomestic
r evenue r evenue
slowedslowed
BroadBroad
money liabilities
money
Broad money (y/y
liabilities percent
liabilities change)
(y/y percent
(y/y percent
change)change) Central government domestic
CentralCentral
government
governmentrevenue
domestic domestic
revenuerevenue
… broad… broad
moneymoney(M2) growth
(M2) growth decelerated
decelerated
… … … domestic
(y/y percent change) …(y/y
domestic
r (y/y
evenue
percent r change)
evenue
percentslowed slowed
change)
… broad money
… broad (M2) growth decelerated … … domestic r evenue slowed
Broadmoney
Broad (M2)
moneymoney growth
liabilities
liabilities decelerated
(y/y percent
(y/y percent …
change)
change) …
Central domestic
Central
government r evenue
government
domestic slowed
domestic
revenue revenue
Broad
M2 y/y, M2 Broad money
moneychange
y/y, change
percent percent liabilities (y/y percent change)
liabilities (y/y percent change) Central
Central government
government
Domestic domestic
domestic revenue
revenue
(y/yDomestic
revenue
percent revenue
(y/y percent
change)change)
Pre-COVIDPre-COVID
historicalhistorical
average (5average
years)(5 years) 30 30 (y/y percent
Pre-COVID-19
Pre-COVID-19 change)
(y/y percent change) years)(5 years)
historical
historical aveage (5aveage
50 M2
50 y/y,M2
percent
y/y, percent
change change Domestic
Domestic
revenuerevenue
M2percent
M2 y/y, y/y, percent
change change 25 25 Domestic
Domestic revenue
revenue
Pre-COVID
Pre-COVID
historical
historical
average average
(5 years)(5 years) 30 30 Pre-COVID-19
Pre-COVID-19
historical
historical
aveage (5
aveage
years)(5 years)
Pre-COVID historical
Pre-COVID historical average average (5 years)
(5 years) 30 Pre-COVID-19 historical
Pre-COVID-19 historical aveageaveage (5 years)
(5 years)
50
40 50
40 2030 20
50 25 25
50 25
1525 15
40 40 20 20
30 30
40 20
40 1020 10
15 15
30 30 515 155
20 20
30 10 10
30 100
010
20 20 5 5
10 10
20 5-5
20 -5 5
0 0
-10 0 0
-10
10
0 100
10 -5 -5
10 -5
-15-5
Apr-15Apr-15

Apr-15Apr-15

Apr-18Apr-18

Apr-18Apr-18

Apr-21Apr-21

Apr-21Apr-21

-15
Jul-20 Jul-20

Jul-20 Jul-20

Jul-23 Jul-23

Jul-23 Jul-23
Jul-14 Jul-14

Jul-14 Jul-14

Jul-17 Jul-17

Jul-17 Jul-17

Jan-22Jan-22

Jan-22Jan-22
Jan-13Jan-13

Jan-13Jan-13

Jan-16Jan-16

Jan-16Jan-16

Jan-19Jan-19

Jan-19Jan-19
Oct-13Oct-13

Oct-13Oct-13

Oct-16Oct-16

Oct-16Oct-16

Oct-19Oct-19

Oct-19Oct-19

Oct-22Oct-22

Oct-22Oct-22

0 0 -10 -10
8-m
-10 20198-m 8-m
201920208-m 8-m
202020218-m 8-m
202120228-m 8-m
202220238-m 2023
0 0 -10
-15 -15
Apr-15

Apr-18

Apr-21

-15 2019
Jul-20

Jul-23
Jul-14

Jul-17

Jan-22
Jan-13

Jan-16

Jan-19
Oct-13

Oct-16

Oct-19

Oct-22
Apr-15

Apr-18

Apr-21

-15 8-m 8-m 2019

8-m 2020
8-m 2020
8-m 2021
8-m 2021
8-m 20228-m 2022
8-m 2023 8-m 2023
Jul-20

Jul-23
Jul-14

Jul-17

Jan-22
Jan-13

Jan-16

Jan-19
Oct-13

Oct-16

Oct-19

Oct-22

Sources: Cambodian authorities; World Bank staff projections. 8-m 2019

8-m 2019 8-m 2020
8-m 2020 8-m 2021
8-m 2021 8-m 2022
8-m 2022 8-m 2023
8-m 2023
Note: p = projection; y/y = year on year.

Cambodia Economic Update November 2023 5


RECENT DEVELOPMENTS
ECONOMIC ACTIVITY
IS SLOWER THAN
PREVIOUSLY
ANTICIPATED
The global economy remains in a precarious state
amid the protracted effects of the overlapping
negative shocks of the pandemic, Russia’s
invasion of Ukraine, and the sharp tightening of
monetary policy to contain high inflation.1 Global
growth is projected to slow significantly in the second
half of this year, with weakness continuing in 2024.
Inflation pressures persist, and tight monetary policy
is expected to weigh substantially on activity. Recent
banking sector stress in advanced economies will
also likely dampen activity through more restrictive
credit conditions (see box 1 on global economic
developments and outlook).
Economic activity in much of developing East
Asia and Pacific (EAP), other than several
Pacific Island countries, has recovered from
the succession of shocks since 2020 but is now
slowing (figure 1).2 While output has surpassed pre-
pandemic levels in most of the larger EAP economies,
recovery has been uneven across the region. Output in
China and Vietnam already exceeded pre-pandemic
levels in 2020 and is now about 20 percent higher.
The recovery has also been uneven across sectors.
Information and communication technology and
finance have experienced relatively strong growth.
Regionally, the service sector started to recover after
the economic reopening in several of the region’s
economies, benefitting from the release of pent-up
demand. However, output in the transportation,
accommodation, and catering sectors in the
Philippines and Thailand, and construction and real
estate in Malaysia, the Philippines, and Thailand, are
still well below pre-pandemic levels. Other emerging
market and developing economies have seen even
weaker recoveries, especially low-income countries.
Higher interest rates and depreciated currencies have
exacerbated the difficulties of low-income countries,
placing them at high risk of distress or already in
distress.3
Signs of weakening economic activity continued
across the EAP region. In most major EAP
economies, private consumption, which bounced
back from COVID-19 and inflation-induced
austerity, sustained growth in the first half of 2023,
but is running out of steam unexpectedly early in
China. Meanwhile, exports of both manufactured
goods and commodities have contracted. Public and
private investment also remains low in much of the
region. Fiscal policy is now less expansionary in most
countries. The key external factors are slowing global

Figure Figure
Figure 1. 1. Economic
Economic
1. Economic recovery
recovery
recovery continued
continued
continued Contribution Figure
Figure
Figure 2. 8-month
2.2.Eight-month
8-month arrivals
arrivals
arrivalandand tourism
tourism
and receipt
receipt
tourism receipts
Contribution
Contribution
to real GDP to real
growth to real GDP GDP growth
growth (percent,
(percent,
(percent, 2019 = 100) 2019
2019 = 100
= 100 ) )
(percent) (percent)
(percent)

Indus-garment
Indus-garment & footwear
& footwear Serv-others
Serv-others Tourism
Tourism receipt
receipt (entrance
(entrance fee revenue)
fee revenue)
Indus-construction
Indus-construction Taxes
Taxes less subsidies
less subsidies Arrivals
Arrivals
Indus-others
Indus-others Agriculture
Agriculture 20192019
Serv-hotels
Serv-hotels & rests
& rests GDPGDP growth
growth 80.380.3
10 10
7.5
8 7.06.9 6.97.0 7.07.5 7.1 7.1
8 7.0
5.86.1 6.1
6 6 5.2 5.25.4 5.45.8
4 3.0 3.0
4
2 2 33.233.2
28.128.1
26.426.4
0 0 22.922.9
-2 -2
-3.1 -3.1 6.3 6.3
-4 -4
0.3 0.32.8 2.8
2023p

2024p

2025p
2023p

2024p

2025p
2019

-6 -6
2015

2016

2017

2018

2020

2021

2022
2019
2015

2016

2017

2018

2020

2021

2022

20202020 20212021 20222022 20232023

Sources: Cambodian authorities and World Bank staff projections. Source: Cambodian authorities.
Note: p = projections.

1 World Bank. 2023c.

2 World Bank. 2023a.
3 Figure
Figure
IMF 3. 3.
2023a. Air Air a rrivals
a rrivals remained
remained relatively subdued
relatively subdued Figure
Figure 4. 4. Accommodation
Accommodation supply
supply
Arrivals
Arrivals by mode
by mode of transport
of transport (number
(number of rooms
of rooms of guesthouses
of guesthouses andand hotels
hotels ) )
(million
(million of visitors
of visitors during
during the the
firstfirst 8 months
8 months ) )
6 Cambodia Economic Update
2,820 November 2023
2,820
8-month
8-month 20192019 8-month
8-month
20232023 20222022 20192019
3.5 3.5 2,419
2,419
llions
lions

3.0 3.0 2,142

2,142
growth, still tight financial conditions, and an increase creating jobs, ensuring equity, increasing efficiency,
in trade protection, combined with industrial policies. and maintaining sustainability. The Pentagonal
Among the domestic factors in EAP economies, the Strategy is designed to improve the country’s
most important are the COVID-19 legacy of amplified competitiveness by addressing Cambodia’s high
public and private debt and the policy stance, especially transport and logistics costs and poor performance
fiscal and monetary. on ease of doing business and the investment climate,
among others. In this regard, the first post-pandemic
The Chinese economy has also slowed,4 and high-level public-private sector forum was organized
this does not bode well for Cambodia, given in November 2023.
that China is one of Cambodia’s major trading
partners, especially for imports of intermediate
goods used in the production of garments, travel
goods, and footwear products for export. China INTERNATIONAL ARRIVAL
is also Figure
the main source ofrecovery
1. Economic foreigncontinued
direct investment
(FDI), accounting for about half of FDI inflows in
Contribution to real GDP growth
NUMBERS ACCELERATED
Figure 2. 8-month arrivals and tourism receipt
(percent, 2019 = 100 )
Cambodia. During the(percent)pre-pandemic period, Chinese During the first eight months of 2023,
tourists ranked top, accounting for more than a international arrivals
Tourism reachedfee3.5
receipt (entrance million, up
revenue)
Indus-garment & footwear Serv-others
third of total international arrivals.
Indus-construction Taxes less China’s
subsidies growth from 1 million
Arrivalsduring the same period in 2022.
hasIndus-others
slowed substantially sinceAgriculture
April 2023. Domestic Indicating a2019
relatively rapid recovery of international
demand has&weakened,
Serv-hotels rests reflecting
GDP subdued
growth consumer arrivals, during the first eight months of 2023, tourist 80.3
10
and business7.0confidence,
7.5 7.1 an incomplete labor market arrivals have recovered to about 80 percent of the
8 7.0 6.9
recovery, and persistent property5.2market 5.4 5.8 turmoil.
6.1 arrival number recorded during the same period in
6
While
4
travel has broadly recovered,
3.0 spending has not. 2019 (figure 2), compared to 67.1 percent and 60.5
The
2
Chinese economy has been impacted by slowing percent for Thailand and Vietnam, respectively. 33.2
global
0
growth, which has tempered external demand. However, 28.1 structure and composition of arrivals
26.4 the
22.9
-2 have changed, indicating a slow recovery of tourism
Like many countries in -3.1the region, economic receipts. During the pre-pandemic 6.3 period, air arrivals,
-4
activity in Cambodia is slower than previously 0.3 2.8
which are often associated with relatively high
2023p

2024p

2025p
2019

-6
2015

2016

2017

2018

2020

2021

2022

anticipated. The newly elected Government of tourist 2020

Cambodia understands the need to address structural
challenges, which are weighing on growth. In this
regard, the 2023–28 Pentagonal Strategy (box 2) was
introduced in August 2023, aimed at boosting growth,
expenditure,2021accounted 2022 for two-thirds
2023and
land arrivals for one-third. The opposite has been
true in the post-COVID-19 period. During the first
eight months of 2023, international arrivals by land
accounted for 2.3 million, while air arrivals accounted

Figure
Figure 3. Air
3. Air a rrivals
arrivals remained
remained relativelysubdued
relatively subdued Figure 4. Figure 4. Accommodation
Accommodation supply supply
Arrivals by mode of transport (number of rooms of guesthouses and hotels )
Arrivals by mode of transport (number of rooms of guesthouses and hotels)
(million of visitors during the first 8 months )
(millions of visitors during the first 8 months)
8-month 2019 8-month 2023 2022 2019 2,820

3.5 2,419
Millions

3.0 2,142
1,976
2.5
2.0
1.5
1.0
0.5
0.0
Air (Total) Phnom Penh Siem Reap SHV airport Land and
airport airport waterways
(Total) Total Siem Reap

4 World Bank 2023b.

Figure 5. Contribution to export growth by market Figure 6. Contribution to export growth by products
(percentage point) (percentage point)
Cambodia Economic
ASEANUpdate November
EU 2023 USA 7
80.0 50 Non-GTF GTF
China RoW Total
40
60.0
 Indus-garment
Indus-garment& &footwear
footwear Serv-others
Serv-others Tourism
Tourism receipt
receipt (entrance
(entrance fee
fee revenue)
revenue)
Indus-construction
Indus-construction Taxes
Taxesless
lesssubsidies
subsidies Arrivals
Arrivals
Indus-others
Indus-others Agriculture
Agriculture 2019
2019
Serv-hotels
Serv-hotels &
& rests
rests GDP
GDPgrowth
growth 80.3
80.3
10
10
88 7.0
7.0 6.9
6.9 7.0 7.5
7.0 7.5 7.1
7.1
5.8 6.1
5.4 5.8 6.1
6for
6 1.2 million (figure 3). In addition,
5.2 while
5.2 5.4 the share Keng International Airport at Sihanoukville, a
3.0
3.0
4of
4 Chinese tourists was the largest, accounting for Chinese investment hotspot (receiving the approved
2almost
2 40 percent of total arrivals during the pre- property development permit value of 33.2US$4.3
33.2
0pandemic 26.4 28.1
26.4 28.1
0 period, it accounted for only 10.5 percent billion in 2019) during the pre-pandemic
22.9
22.9 period
in 2023. The share of Thai tourists is now the largest,
-2
-2 has been worse, declining to 10,000 (0.3 percent of
-3.1
-3.1 6.3
6.3
accounting for 34 percent of the total, up from 5.2
-4
-4 total) during the 0.3first 2.8
0.3 eight months
2.8 of 2023, down

2023p

2024p

2025p
2019
percent in 2019. Rising land arrivals and Thai tourists from 0.5 million (11.2 percent of the total) during
-6
-6
2015

2016

2017

2018

2020

2021

2022
reflect increased foreign tourists with relatively short the same2020
2020period in 2021
2021
2019. 2022
2022 2023
2023
length of stays and low daily expenditures, mainly
Thai, crossing from Aranyaprathet (Thailand) to visit Similarly, revenue collection from Angkor
mostly Poi Pet (Cambodia), where there are casinos temple entrance fees was relatively weak,
catering to foreign tourists. reaching only US$20.3 million or a third of
what was collected during the same period
While the3.
Figure
Figure 3. share
Air of total
Air aa rrivals
rrivals international
remained
remained relatively arrivals
relatively subdued
subdued in 2019.FigureAlthough
Figure 4. international arrival
4. Accommodation
Accommodation supply numbers
supply
reached 80 percent Arrivals
Arrivals by byofmode
theof
mode ofnumber
transport recorded
transport quickly recovered,
(number
(number of
of roomstourism
rooms of receipts and
of guesthouses
guesthouses collected
and hotels ))from
hotels
during (million
the same
(million of period
of visitors
visitors in 2019,
during
during the firstthe
the first share)) of
88 months
months international arrivals by land are likely to be lower than
arrivals to Siem Reap reached only one-tenth those from air arrivals. In this regard,
2,820tourism receipts
2,820
8-month
8-month 2019
2019 8-month
8-month 2023
2023 2022
2022 2019
2019
of the pre-pandemic level. During the first eight collected during the post-pandemic period remained
3.5
3.5
months of 2023, international arrivals to Siem Reap relatively slow. In2,419
2,419
2022, Cambodia’s tourism receipts
Millions

3.0
3.0
reached 0.38 million, accounting for 11.0 percent of 2,142
2,142
were estimated by the Cambodian authorities to
1,976
1,976
the2.5
2.5total, compared to 1.3 million or 38.4 percent have reached only 28 percent (US$1.4 billion) of
of 2.0
the total during the same period in 2019. As
2.0 what was collected in 2019 (US$4.9 billion).5 This
Siem
1.5 Reap is the largest tourist attraction site in the
1.5 indicates that the recent increase in international
country,
1.0
1.0
the revival of the tourism sector is not being arrivals may be driven by short-stay border-crossing
felt by many travel, tourism, and hospitality industries tourists arriving by land to Cambodia’s border town
0.5
0.5
there. With the pre-COVID-19 construction boom of Poi Pet, Bantey Meanchey province, mainly from
0.0
0.0
boosting the supply of guesthouse and hotel rooms Thailand, with relatively low spending per tourist.
Air
Air (Total)
(Total) Phnom
PhnomPenhPenh Siem
SiemReap
Reap SHVSHVairport
airport Land
Landand
and
(figure 4), Siem Reap airport is increasingly
airport airport
airport experiencing
waterways
waterways In addition, the number of domestic tourists, which
a mismatch between tourism supply and tourism (Total)
(Total) surged, reachingTotal13 million, due mainly
Total Siem to the Khmer
SiemReap
Reap
demand, amplifying the negative impact of slow New Year celebration during the first half of 2023,
tourism receipts. The arrival number to Kong boosted by one-off pent-up demand after the country

Figure
Figure 5. Contribution
Figure 5. Contributionto
Contribution toto export
export
export growthby
growth
growth bymarket
by market
market Figure
Figure 6.6.Contribution
Figure 6. Contribution
Contribution toto
to export
export
export growthby
growth
growth byby products
products
products
(percentage point) (percentage
(percentage point)
point) (percentage point) (percentage
(percentage point)
point)
80.0
80.0 ASEAN
ASEAN EU
EU USA
USA 50
50 Non-GTF
Non-GTF GTF
GTF
China
China RoW
RoW Total
Total
40
40
60.0
60.0
30
30
40.0
40.0
20
20

20.0
20.0 10
10

00
0.0
0.0
-10
-10

-20.0
-20.0 -20
-20

-30
-30
-40.0
-40.0
Jul-20

Jul-21

Jul-22

Jul-23
Apr-20

Apr-21

Apr-22

Apr-23
Jan-20

Jan-21

Jan-22

Jan-23
Oct-20

Oct-21

Oct-22
Jul-23
Jul-20

Jul-21

Jul-22

Apr-23
Apr-20

Apr-21

Apr-22

Jan-23
Jan-20

Jan-21

Jan-22
Oct-20

Oct-21

Oct-22

Source: Cambodian authorities. Source: Cambodian authorities.

Note: RoW = rest of the world. Note: GTF = garment, travel goods, and footwear.

5 Ministry of Tourism 2023.

8 Cambodia Economic Update November 2023

 completely relaxed mobility restrictions, may have
also eased.
Cambodia’s neighbors, especially Thailand and
Vietnam, have been more successful in attracting
Chinese tourists. By August 2023, Chinese tourists
accounted for 12.3 percent and 14.2 percent for
Thailand and Vietnam, respectively, compared to
10.5 percent for Cambodia.
GOODS EXPORTS
WEAKENED AS GARMENT,
TRAVEL GOODS, AND
FOOTWEAR EXPORTS
EASED
Cambodia’s merchandise exports weakened,
due to the continued negative impact of the
slowdown in external demand. During the first
eight months of 2023, goods exports (including gold)
shrank by 2.0 percent, reaching US$13.9 billion.
Nevertheless, year on year (y/y) data indicate that
goods exports appear to have gradually stabilized
(figure 5). The deterioration of garment, travel goods,
and footwear (GTF) exports remained pronounced
(figure 6), indicating a relatively elastic demand for
GTF products with respect to incomes of Cambodia’s
main export markets, especially the United States and
European Union. However, exports of non-GTF
products accelerated.6
Goods exports to the United States, Cambodia’s
largest export market, accounting for 43.7
percent of total exports, reached US$6.4
billion, or a 4.8 percent y/y decline during the
first eight months of 2023. However, reflecting
moderation of the decline, exports expanded by 28.8
percent y/y in August 2023, after contracting by 10.1
percent in July 2023. The increase in goods exports
to the U.S. market in August 2023 was driven by
“other products,” electrical parts, and vehicle parts,
contributing 131 percentage points, 121.4 percentage
points, and 42.3 percentage points, respectively.
Similarly, goods exports to the EU, Cambodia’s
second-largest export market, accounting for 17.7
percent of total exports, also shrank, contracting at
11.2 percent during the first eight months of 2023.
The ASEAN, China, Japan, United Kingdom, and
rest of the world markets accounted for 10 percent,
6.7 percent, 5.5 percent, 3.8 percent, and 12.5 percent
of total exports, respectively.

Figure
Figure7. 7.Manufacturing
Manufacturingsector’s
sector’s
jobs
jobs
and
and
factories
factories Figure
Figure
8. 8. Garment,
Garment,travel
travel
good
good
and
and
footwear
footwear
jobs
jobs
Figure 7. Manufacturing sector’s jobs and factories Figure 8. Garment, travel goods, and footwear jobs
Total
Total
workers
workers Total
Total
factories
factories
(RHS)
(RHS) Garment
Garment Travel
Travel
goods
goods
& footwear
& footwear
(RHS)
(RHS)
1,070
1,070 2,100
2,100 700700 280280
272272
Thousands
Thousands

Thousands
Thousands
Thousands
Thousands

1,044
1,044 680680 270270
1,050
1,050 2,000
2,000 660660
260260
1,022
1,022 640640
1,030
1,030 1,900
1,900 256256250250
620620 614614
1,010
1,010 1,800
1,800 600600 240240
580580 230230
590590
990990 1,005
1,005 1,700
1,700 560560
220220
540540
970970 1,600
1,600 210210
520520
950950 1,500
1,500 500500 200200
Jun-23
Jun-23
Jun-20
Jun-20

Jun-21
Jun-21

Jun-22
Jun-22

Aug-23
Aug-23
Aug-20
Aug-20

Aug-21
Aug-21

Aug-22
Aug-22

Apr-23
Apr-23
Apr-20
Apr-20

Apr-21
Apr-21

Apr-22
Apr-22
Oct-20
Oct-20

Oct-21
Oct-21

Oct-22
Oct-22
Dec-20
Dec-20

Dec-21
Dec-21

Dec-22
Dec-22
Feb-23
Feb-21
Feb-21

Feb-22
Feb-22

Feb-23
Mar-20
Jun-20
Mar-20
Jun-20

Mar-21
Jun-21
Mar-21
Jun-21

Mar-22
Jun-22
Mar-22
Jun-22

Mar-23
Jun-23
Mar-23
Jun-23
Sep-19
Sep-19

Sep-20
Sep-20

Sep-21
Sep-21

Sep-22
Sep-22
Dec-19
Dec-19

Dec-20
Dec-20

Dec-21
Dec-21

Dec-22
Dec-22

Source: Cambodian authorities. Source: Cambodian authorities.

Note: RHS = right-hand scale. Note: RHS = right-hand scale.

Figure
Figure9. 9.Tradeable
Tradeable
sector
sector
investment
investment projects
projects Figure
Figure10.10.Approved
Approved FDI
FDI-financed
-financed
project
project
byby
sector
sector
Approved
ApprovedQIPQIPvalue
value (US$
(US$
billion,
billion,
8-month
8-month2023)
2023)
(US$
(US$billion,
billion,
6-month
6-monthmoving
moving average,
average,
fixed
fixed
asset)
asset)

1.20
1.20 Wholesale
Wholesale & retail;
& retail;
14.0;
14.0;
1.5%1.5%
Domestic
Domestic(6mma)
61.00Unfortunately, (6mma)
further FDI
analysis FDI
(6mma)
(6mma)
cannot be conducted, as a large part of non-GTF exports is classified as “others” exports under Cambodia’s goods export data.
1.00

Agriculture
Agriculture
&&
0.80
0.80
food
food
processing;
processing;
Cambodia Economic Update November 2023 147,8;
147,8;
16%
16% 9
0.60
0.60
Non-garment
Non-garment
industries;
industries;
0.40
0.40 Garment;
Garment;
471,0;
471,0;
51,9%
51,9%
274,9;
274,9;
30,3%
30,3%

THE NUMBER OF
MANUFACTURING
JOBS SHRANK AS
GARMENT, TRAVEL
GOODS, AND FOOTWEAR
EMPLOYMENT DECLINED
Consistent with subdued goods exports,
employment in the manufacturing sector also
declined. Manufacturing jobs declined by 44,000,
to 1 million in May 2023, as goods exports were hit
hardest by the decline in external demand, from
its post-COVID-19 peak in July 2022. However,
employment has since recovered, reaching 1.022
million in August 2023 (figure 7). The relatively
sharp decline in net employment during July 2022
to May 2023, largely reflected the impacts of the
global demand slowdown on Cambodia’s main
manufacturing sector, which includes the garment,
travel goods, footwear, and textile industries. These
industries provide as much as 83 percent of total
employment in the manufacturing sector. As a result,
during the 10 months covering July 2022–May 2023,
net employment in these industries declined by 5
percent or 40,000, to 0.84 million, down from 0.88
million. This decline accounted for 90 percent of the
total employment decline during the period (figure
8). Given that these formal industries are receiving
the minimum wage of about US$200 a month,
the economic effect created by the loss of 40,000
employed people could be estimated to reach at least
US$100 million in wages and allowances alone.
Despite the decline in net employment, the number
of factories in the manufacturing sector continued
to grow, reflecting some gains in industrial
diversification, likely to be less labor-intensive
and possibly higher value-added manufacturing
sectors. Factory statistics showed a relatively large net
gain in 200 factories during 2020–23, reaching a total
2,026 factories by August 2023. Of the increase in the
number of factories, the metal, paper, furniture, plastic,
and chemical industries accounted for about two-thirds.
However, these industries combined are responsible
for only 10 percent of total employment in the
manufacturing sector. The expansion of Cambodia’s
food, beverage, and tobacco industry, which has been
known as a relatively large employment generation
manufacturing sector, may have already peaked, with
relatively unchanged factory and employment numbers
of 165,000 and 27,000, respectively, since 2022.

Box 1. Global economic developments and outlook

Despite some pockets of resilience, particularly in the United States, global activity continues to moderate,
with recent Purchasing Managers’ Indexes (PMIs) suggesting weakness in manufacturing is broadening
to the services sector (figure B1.1). The U.S. economy continued to expand steadily in the first three quarters of
the year, as near record-low levels of unemployment bolstered consumption. However, in the euro area, growth was
largely stagnant early in the year and turned negative in the third quarter, while inflation remains stubbornly high
and above the European Central Bank target. In Japan, while services activity remains solid, leading indicators of
manufacturing activity have been weak, while inflation has been high by historical standards.
Global goods trade continued to contract into the second half of 2023, while global industrial production
growth has been soft. Leading indicators point to further global trade weakness, with PMIs for new export orders
recently in contractionary territory. In addition, while a recovery in global tourism has helped lift services trade, there
are signs the recovery is fading. The latest conflict in the Middle East has raised geopolitical risks for commodity
markets, though so far its impact on prices has been small. Nevertheless, even before the conflict, commodity prices
were relatively high, about 45 percent above the 2015–19 average in nominal terms.1 Global financial conditions
have also tightened substantially recently, with advanced-economy government bond yields increasing sharply,
particularly in the United States, while the U.S. dollar has strengthened, and equity volatility has increased.
With overall activity expected to continue softening toward the end of the year, global growth is projected
to fall in 2023 to 2.1 percent, from 3.1 percent last year.2 Next year, growth is expected to pick up only
moderately, to 2.4 percent (figure B1.2). The weak outlook reflects the lagged effects of substantial monetary policy
tightening in both advanced economies and emerging market and developing economies in response to high inflation.
Since the start of the U.S. monetary policy tightening cycle in early 2022, the Federal Reserve has raised policy interest rates
by around 5 percentage points, one of the largest increases in the past four decades. In addition, growth in China is expected
to slow next year, amid continued strains in the local property market, weak external demand, and subdued sentiment.

10 Cambodia Economic Update November 2023

 Global trade growth is forecast to slow to 1.7 percent in 2023. As global consumption returns to its pre-
pandemic mix between goods and services, trade is expected to recover modestly, to 2.8 percent in 2024, only slightly
stronger than GDP growth. Moreover, longer-term global growth prospects remain lackluster, with world potential
growth expected to slow over the remainder of the decade, reflecting both a weaker demographic outlook and weaker
productivity growth.
Risks to the global outlook remain tilted to the downside, and stem from intensified geopolitical tensions,
trade fragmentation, weaker-than-expected growth in China, and tighter-than-expected global financial
conditions. Geopolitical risks have risen markedly in the wake of the conflict in the Middle East, with potentially
significant implications for commodity markets if the conflict escalates. History suggests that depending on the
duration and scale of an escalation of a conflict, substantial oil supply disruptions could lead to soaring energy
prices.3 This could have significant knock-on effects for inflation around the world, and potentially require central
banks to tighten monetary policy, which would weigh on growth.

Figure
Figure
B.1.1.
Figure B.1.1.
Purchasing
B.1.1. Purchasing
Managers’
Managers’
Indexes
Indexes
Purchasing Managers’ Indexes
Figure
Figure Figure
B.1.2.
B.1.2. B.1.2.
Global
Global
growth
growth
and trade
Global growth and trade
and trade

Index,Index,
50+ =50+
expansion
= expansion Percent
Percent GDP GDPTradeTrade
7 7
60 60 Services
Services Manufacturing
Manufacturing 6 6
5 5
55 55
4 4

50 50 3 3
2 2
45 45 1 1
0 0
2022 2022 2023f2023f 2024f2024f

Sources: 1. World Bank 2023d. 2. World Bank 2023c. 3. World Bank 2023d.
Note: This box was prepared by Samuel Christopher Hill, DECPG.

30 percent of the total (figure 10). The share of FDI-

APPROVED FDI SLOWED
Approved FDI project value classified as a qualified
investment project (QIP) eligible to receive
investment incentives under the Investment Law,
reached US$908 million, a contraction of 7.3
percent y/y during the first eight months of 2023
(figure 9)7. This is well below the approved FDI-
financed project value during the same period in 2019,
which was US$1.5 billion. Of the total US$908 million,
the non-garment industry is the largest, accounting for
US$471 million or 52 percent of total. The largest share
of non-garment projects includes cement processing
(US$141.8 million), footwear (US$80 million), and
travel goods (US$60 million). Despite the decline in
garment exports, foreign investor appetite to finance
the garment industry continued, accounting for the
second-largest investment of US$274.9 million or
financed agriculture and agroprocessing also increased,
reaching 16 percent or US$147 million, indicating a
renewed appetite for investing in the sector. Targeting
QIP investment projects, the Cambodian authorities
issued in June 2023 the sub-decree to implement the
new Investment Law, which was adopted in late 2021
(see box 3).
This year’s decline follows a significant increase
in approved FDI-financed QIP project value last
year. Total investment reached US$1.15 billion in
2022, or a 75.4 percent increase. In 2022, approved
FDI projects were diversified well beyond garments,
covering the logistics, energy, and hospitality sectors,
which received US$1.3 billion, US$389 million,
and US$129 million, respectively. During the past
decade, most of the approved FDI-financed projects in

7 The data covers only newly approved qualified investment projects located outside special economic zones. A comprehensive data from the Council for
the Development of Cambodia showed that approved QIP value reached US$4.0 billion or 14.1 percent increase during the first 10 months. However,
they are at the aggregate level and can’t be broken down.

Cambodia Economic Update November 2023 11

 Figure 7. Manufacturing sector’s jobs and factories Figure 8. Garment, travel good and footwear jobs
Figure 7. Manufacturing sector’s jobs and factories Figure 8. Garment, travel good and footwear jobs

Total workers Total factories (RHS) Garment Travel goods & footwear (RHS)
Cambodia came from China
Total workers (including
Total factories (RHS) Hong Kong hit the Garment
economy in Travel
2020,goods
construction and real
& footwear (RHS)
1,070China). The share of approved Chinese 2,100 700 280
SAR,
1,070 2,100
FDI- estate
700 activity stalled, and the share of approved
272 280 QIP

Thousands

Thousands
Thousands

1,044 680 272

financed projects rose to 90 percent in 2023, up from investment project value investing in the construction 270

Thousands

Thousands
Thousands

1,050 1,044 2,000 680

660 270
55 percent in 2014.
1,050 2,000 and660real estate sector plummeted, declining to 260 14.9
1,022 640 260
1,030 1,022 1,900 percent
640
620
in 2022. During the pandemic,614 while
256 250the
There
1,030 are notable shifts in the composition
1,900
share
620 of QIPs investing in the 256 250
614 construction and
1,010 1,800 600 240
of FDI
1,010
projects, compared to the pre-COVID 1,800 real600estate sector shrank, investment in the240non-
580 590 230
period, with a rising share of non-Garment
1,005 1,700 garment 560 sector expanded, rising from 6.7 590 percent
230 of
990 580
manufacturing
990 and a decline in 1,005real1,700
estate 220
560approved QIP value in 2019 to 70.7 percent
total 540 220 in
investments.
970 During the pre-COVID-19 period, 1,600 540
2022,520 as diversification continued. The non-garment 210
970 1,600 210
the largest share of approved QIP (domestic and FDI- 520
manufacturing
500 sector included the metal, paper, 200
950 1,500
financed) project value went to the construction
1,500 and 500 200

Jun-23
Jun-20

Jun-21

Jun-22

Aug-23
Aug-20

Aug-21

Aug-22

Apr-23
Apr-20

Apr-21

Apr-22
Oct-20

Oct-21

Oct-22
950

Dec-22
Dec-20

Dec-21

Feb-23
Feb-21

Feb-22
furniture, plastic, and chemical industries, as well
Mar-20
Jun-20

Mar-21
Jun-21

Mar-22
Jun-22

Mar-23
Jun-23
Sep-19

Sep-20

Sep-21

Sep-22
Dec-19

Dec-20

Dec-21

Dec-22

Jun-22

Jun-23
Jun-20

Jun-21

Aug-23
Aug-20

Aug-21

Aug-22
Apr-22

Apr-23
Apr-20

Apr-21
Oct-20

Oct-21

Oct-22
Dec-20

Dec-21

Dec-22
Feb-23
Feb-21

Feb-22
real estate sector. The share of project investment
Mar-20
Jun-20

Mar-21
Jun-21

Mar-22
Jun-22

Mar-23
Jun-23
Sep-19

Sep-20

Sep-21

Sep-22
Dec-19

Dec-20

Dec-21

Dec-22
as the logistics, energy, and hospitality industries. If
value going to the construction and real estate sector these newly emerging manufacturing industries are
in total QIP investment rose to 90 percent in 2019, properly nurtured, product diversification will follow.
up from 35 percent in 2014. When the pandemic

Figure 9. Tradeable sector investment projects Figure 10. Approved FDI -financed project by sector
Figure9.9.Tradeable
Figure Tradable sectorinvestment
sector
Approved investment
QIP value projects
projects Figure10.10.
Figure Approved
Approved
(US$FDI FDI-financed
-financed
billion, project
project
8-month 2023) by sector
by sector
Approved QIPApproved
(US$ billion, value
6-month QIP value
moving average, fixed asset) (US$ billion, (US$
8-month 2023)
billion, 8-month 2023)
(US$ billion, 6-month movingaverage,
6-month moving average,fixed
fixedasset)
asset)
1.20 Wholesale & retail;
1.20 Wholesale & retail;
14.0; 1.5%
Domestic (6mma) FDI (6mma) 14.0; 1.5%
1.00 Domestic (6mma) FDI (6mma)
1.00
Agriculture &
0.80 Agriculture &
0.80 food processing;
food147,8;
processing;
16%
0.60 147,8; 16%
0.60 Non-garment
Non-garment
industries;
0.40 industries; Garment;
0.40 471,0; 51,9%
471,0; 51,9% Garment;
274,9; 30,3%
0.20 274,9; 30,3%
0.20
-
-
Apr-19

Apr-20

Apr-21

Apr-22

Apr-23
Aug-18

Aug-19

Aug-20

Aug-21

Aug-22

Aug-23
Jun-18

Jun-19

Jun-20

Jun-21

Jun-22

Jun-23
Oct-18
Feb-19

Oct-19
Feb-20

Oct-20
Feb-21

Oct-21
Feb-22

Oct-22
Feb-23
Dec-18

Dec-19

Dec-20

Dec-21

Dec-22
Apr-19

Apr-20

Apr-21

Apr-22

Apr-23
Aug-18

Aug-19

Aug-20

Aug-21

Aug-22

Aug-23
Jun-18

Jun-19

Jun-20

Jun-21

Jun-22

Jun-23
Oct-18
Feb-19

Oct-19
Feb-20

Oct-20
Feb-21

Oct-21
Feb-22

Oct-22
Feb-23
Dec-18

Dec-19

Dec-20

Dec-21

Dec-22

Source: Cambodian authorities. Source: Cambodian authorities.

Note: QIP = qualified investment project; 6 mma = 6-month moving average.

BoxFigure
2. The11. ApprovedStrategy
Pentagonal propertyPhase
project1 permit s Figure 1 2. Approved permit area by property type
Figure 11. Approved(US$
property project permit s
million) Figure 1 2. Approved permit
(million area by
square property type
meters)
(US$ million) (million square meters)
Approved value o/w value for SHV Residential Industrial Comercial Touristic Others
Approved o/w value for SHV
valuevalue (y/y, RHS)
Approved
The new 2023–28 Pentagonal Strategy Phase 1 was introduced Residential Industrial
14.0 growth,
to boost jobs, ensureTouristic
createComercial Others
equity, increase
14.0
Millions

3500
Approved value (y/y, RHS) 800
3500 efficiency, and maintain sustainability. It is designed 800 to strengthen and expand the achievements from the previous
Millions

700 12.0
3000mandates, institutional and governance reform, 700 developing human
12.0 capital, and enhancing economic diversification
3000 and competitiveness. Its mission is to safeguard peace 600and strengthen the foundations needed to accelerate national
600 10.0
2500 500
2500 development, in order to achieve the milestone of 500
becoming an10.0
upper middle-income country by 2030 and a high-
2000income country by 2050, under Cambodia’s 2050 vision. 400 8.0
2.9
2000 400 8.0
300 1.5 2.9
To this end, the Pentagonal Strategy introduces
300 five strategic objectives:
6.0 (i) 2.0
ensuring crisis-resilient annual
1500 2.0 1.5 1.4
200 6.0 1.4
1500 economic growth of around 7 percent on average, 200 creating more jobs; (ii) achieving the poverty reduction target
1000of below 10 percent; (iii) strengthening governance100 4.0
1000 100 capacity and4.0improving 0.7 the quality of public institutions; (iv)
0.7
500ensuring sustainable socioeconomic development;
0
0
and (v) building resilience to climate
5.4
5.9
5.9
change. The
5.3 five1.1sides6.0of6.0
2.0 3.5 5.4 5.3
-100 development; Pentagon 2: economic diversification and 1.1
500 the Pentagonal Strategy are Pentagon 1: human capital 2.0
-100 3.5 2.1
0competitiveness enhancement; Pentagon 3: developing -200 the private sector and employment; Pentagon 2.1 4: adopting
0 -200 0.0
May-22
Jun-19

Mar-23
Jul-21

Aug-23
Apr-20
Jan-19

Oct-22
Nov-19

Sep-20

Dec-21
Feb-21

a resilient, sustainable, and inclusive development approach to0.0 socioeconomic transformation, while optimizing
8

3
May-22
Jun-19

Mar-23
Jul-21

Aug-23
Apr-20

01

01

02

02

02

02
Jan-19

Oct-22
Nov-19

Sep-20

Dec-21
Feb-21

-28

-29

-20

-21

-22

-23

demographic dividends, among others; and Pentagon 5: developing a digital economy and society.
8m01

8m01

8m02

8m02

8m02

8m02
-2

-2

-2

-2

-2

-2
8m

8m

8m

8m

8m

8m

12 Cambodia Economic Update November 2023

 Six priority programs will be implemented, which include healthcare services toward universal health coverage;
providing vocational and technical training for youths from poor and vulnerable households; institutionalizing the
national social assistance programs; formulating and accelerating the implementation of the Informal Economy
Development Strategy to enable the informal sector to participate in the formal economy; and introducing
coordinating mechanisms and financing programs that enhance agricultural production, market access, and price
stability, while deploying agricultural technical officers to all communes that have agricultural activities across the
nation and forming farmers associations in the rural areas.

Strengthening the capabilities of public administration, improving the quality of education, enhancing health
services, and strengthening the quality and efficiency of the justice system to address challenges.

Pentagon 2 targets economic diversification and competitiveness enhancement. Side 1 of Pentagon 2 aims
at developing key sectors and new sources of growth, implementing an Automotive and Electronics Sectors
Development Roadmap, and a 2020–27 Garment, Footwear and Travel Goods Sector Development Strategy, while
accelerating Sihanoukville development as a multipurpose special economic zone. Side 2 targets the connectivity,
transport, logistics, energy, and digital sectors by enhancing connectivity and efficiency in the transport and logistics
sectors aiming at (i) implementing the Interim Masterplan on Intermodal Transport Connectivity and Logistics
System 2021–30 and the Comprehensive Masterplan on Cambodia Intermodal Transport and Logistics System
2023–30; (ii) increasing capital investment to develop key infrastructure projects, which include the Poipet-Siem
Reap-Phnom Penh new railway network; and (iii) carrying out a study on roads and amending the law on roads to
adjust the maximum weight level, and preparation of laws on land transport, water transport, seaports, and railways.

Side 3 of Pentagon 2 improves the business and investment environment, including the introduction and amendment
of laws on commercial regulation and commercial registration; the law on commercial enterprises, bankruptcy law,
and the finalization of trade secrets to ensure sound management of intellectual property. It also aims at accelerating
the enactment of the framework agreement on cross-border paperless trade, and targets establishing monitoring and
evaluation mechanisms and improving business based on the assessment of the ease of doing business and investment.

Effective implementation of the Pentagonal Strategy is underpinned by coordination, monitoring, and evaluation
mechanisms led by the Council of Ministers (CoM). The CoM is delegated to formulate regulations that outline
in detail the methodologies and procedures to coordinate, monitor, and evaluate implementation of the Pentagonal
Strategy.
Source: The Pentagonal Strategy Phase 1, the Royal Government of Cambodia; https://mfaic.gov.kh/files/uploads/1XK1LW4MCTK9/EN%20
PENTAGONAL%20STRATEGY%20-%20PHASE%20I.pdf.

and touristic buildings, rose to US$1.5 billion, or a

APPROVED PROPERTY
DEVELOPMENT PERMIT
VALUE CONTINUED TO
EXPAND
Approved permit value for real estate
development projects continued to expand
during the first eight months of 2023. While it is
too early to draw conclusions as to why, this possibly
reflects renewed investor appetite8 to invest in the real
estate sector, especially the housing market, after the
sector was hit by the pandemic in 2020. Approved
permit value for all types of property developments,
which include residential, industrial, commercial,
186 percent y/y increase during the first eight months
of 2023 (figure 11). Of this, approved property
development permits for projects in Sihanoukville
province, which experienced the most rapid
construction boom during the pre-pandemic period,
accounted for US$656.5 million, or a 152 percent y/y
increase. The number of approved square meters of
property development permits also rose significantly,
reaching 11.5 million, or a 183.6 percent y/y increase.
Approved residential property area continues
to be the largest segment, accounting for more
than half of the total. Approved industrial building
area, which was the smallest segment, accounting for
0.7 million square meters (7.9 percent of the total)

8 The approved construction permit data do not indicate investor nationalities.

Cambodia Economic Update November 2023 13

 (US$
(US$billion,
billion,6-month
6-monthmoving
movingaverage,
average,fixed
fixedasset)
asset)

1.20
1.20 Wholesale
Wholesale&&retail;
retail;
14.0;
14.0;1.5%
1.5%
Domestic
Domestic(6mma)
(6mma) FDI
FDI(6mma)
(6mma)
1.00
1.00

Agriculture
Agriculture&&
0.80
0.80
during the first eight months of 2018, is the second respectively. The surge in thefood approved
foodprocessing;industrial
processing;
147,8;
147,8;16%
16%
largest,
0.60
0.60 accounting for 2.8 million square meters (25.0 building areaNon-garment
at the expense
Non-garment
of that of tourism may
percent of the total) (figure 12) during the first eight reflect a shift in investor
industries;
industries; appetite to production
0.40
0.40
months of 2023. In contrast, during the same period, and manufacturing
471,0; activity fromGarment;
471,0;51,9%
51,9% Garment;
tourism
274,9;
274,9;30,3%
30,3%
activity,
approved
0.20
0.20 tourism and commercial building areas as tourism supply in the form of accommodations
declined, accounting for 0.2 million square meters may have already outstripped tourism demand in
--
(2.1 percent of the total) and 1.8 million square Cambodia’s major urban centers such as the capital
Apr-19
Apr-19

Apr-20
Apr-20

Apr-21
Apr-21

Apr-22
Apr-22

Apr-23
Apr-23
Aug-18
Aug-18

Aug-19
Aug-19

Aug-20
Aug-20

Aug-21
Aug-21

Aug-22
Aug-22

Aug-23
Aug-23
Jun-18
Jun-18

Jun-19
Jun-19

Jun-20
Jun-20

Jun-21
Jun-21

Jun-22
Jun-22

Jun-23
Jun-23
Oct-18
Oct-18
Feb-19
Feb-19

Oct-19
Oct-19
Feb-20
Feb-20

Oct-20
Oct-20
Feb-21
Feb-21

Oct-21
Oct-21
Feb-22
Feb-22

Oct-22
Oct-22
Feb-23
Feb-23
Dec-18
Dec-18

Dec-19
Dec-19

Dec-20
Dec-20

Dec-21
Dec-21

Dec-22
Dec-22
meters (15.3 percent of the total), down from 2.5
million square meters (27.5 percent of the total) and
2.2 million square meters (24.6 percent of the total),
city of Phnom Penh, the tourist attraction site of
Siem Reap, the seaside town of Sihanoukville, and
the border towns of Poi Pet and Bavet.

Figure
Figure
Figure 11.11.
11.Approved
Approved
Approved property
property
property project
project
project permit
permits s
permits Figure
Figure
Figure 112.Approved
12. 2.Approved
Approved permit
permitarea
permit area
areaby
byproperty
by property
propertytype
type
type
(US$ million) (US$
(US$million)
million) (million
(millionsquare
(million square meters) squaremeters)
meters)
Approved
Approvedvalue
value o/w
o/wvalue
valuefor
forSHV
SHV Residential
Residential Industrial
Industrial Comercial
Comercial Touristic Others
Touristic Others
Approved
Approvedvalue
value(y/y,
(y/y,RHS)
RHS) 14.0
14.0

Millions
Millions
3500
3500 800
800
700
700 12.0
12.0
3000
3000
600
600
10.0
10.0
2500
2500 500
500

2000
2000 400
400 8.0
8.0
2.9
2.9
300
300 1.5
1.5
6.0
6.0 2.0
2.0
1500
1500 1.4
1.4
200
200
1000
1000 100
100 4.0
4.0 0.7
0.7
00 5.4
5.4 5.9
5.9 5.3
5.3 1.1
1.1 6.0
6.0
500
500 2.0
2.0
-100
-100 3.5
3.5
2.1
2.1
00 -200
-200
0.0
0.0
May-22
May-22
Jun-19
Jun-19

Mar-23
Mar-23
Jul-21
Jul-21

Aug-23
Aug-23
Apr-20
Apr-20
Jan-19
Jan-19

Oct-22
Oct-22
Nov-19
Nov-19

Sep-20
Sep-20

Dec-21
Dec-21
Feb-21
Feb-21

018
8

019
9

020
0

021
1

022
2

023
3
-2201

-2201

-2202

-2202

-2202

-2202
8m-

8m-

8m-

8m-

8m-

8m-
8m

8m

8m

8m

8m

8m
Source: Cambodian authorities. Source: Cambodian authorities.
Note: RHS = right-hand scale; SHV = Sihanoukville province.

Box 3. Summary of Incentives in Implementing the Sub-decree of the 2021 Investment Law

The Cambodian authorities adopted Sub-Decree No. 139 on the Implementation of 2021 Investment Law dated 26
June 2023. Incentives listed in the sub-decree are provided to qualified investment projects (QIPs). To obtain QIP
status, investors need to register their investment projects (which are not on the negative list) with the Council for
the Development of Cambodia for investment capital of US$5 million or more, and with the Provincial/Municipal
Investment Subcommittee for investment capital of less than US$5 million.
Basic tax incentives. A QIP registered under the (2021) Investment Law is eligible for basic tax incentives consisting
of two options. Option 1: QIPs are eligible for a corporate income tax exemption period of 3 to 9 years. After the
expiration of the CIT exemption period, QIPs shall be eligible to pay a progressive CIT proportion relative to the
total amount of CIT payable as follows: (a) 25 percent for the first 2 years; (b) 50 percent for the next 2 years; and (c)
75 percent for the last 2 years. Option 2: QIP is eligible to (i) deduct capital expenditure through special depreciation,
and (ii) up to 200 percent deductible on other specific expenses for 3 to 9 years. Under both options 1 and 2, QIPs
are eligible for exemption of prepayment of corporate income tax for 3 to 9 years.
Additional incentives include:
• A zero value-added tax (VAT) rate on locally produced production inputs to implement the QIP.

14 Cambodia Economic Update November 2023

 • Permission to deduct 150 percent of the following expenses: (i) research and development (R&D) and innovation
costs; (ii) human resource development costs for vocational training to Cambodian workers; (iii) construction
costs for accommodation, canteens, food courts, nurseries, and other facilities for workers; (iv) costs to modernize
production line machinery; (v) welfare support (transportation, food court, and nursery) costs for Cambodian
workers; and (vi) investment in all kinds of waste treatment.
• Exemption from customs duty, special taxes, and VAT on imports of construction materials and equipment for
construction of accommodation, nurseries, emergency rooms, and food courts where food is provided free of
charge or sold at a reasonable price exclusively for workers of the QIP projects.
Specific incentives eligible for vehicle assembly firms: QIPs assembling new vehicles are eligible to receive a 50
percent to 90 percent tax reduction on customs duties, excises, and the VAT. To be eligible to receive a 50 percent tax
reduction on the customs duties, excises, and VAT, QIP vehicle assembly firms must assemble vehicles with at least
3 percent local content and meet 2 of the 3 following criteria: (1) use 400 or more spare parts pieces for a vehicle, (2)
have capital investment of US$5 million or more, and (3) employ 150 workers or more. To be eligible to receive a 90
percent tax reduction on customs duties, excises, and the VAT, QIP vehicle assembly firms must assemble vehicles
using spare parts not yet pressed, bent, welded, and painted with at least 40 percent local content, and meet 2 of the
3 following criteria: (1) use 700 or more spare parts pieces in a vehicle, (2) have a capital investment of US$45 million
or above, and (3) employ 600 workers or more. Separate criteria for eligibility to receive above a 50 percent and below
a 90 percent tax reduction on customs duties, excises, and the VAT are also specifically provided.
Additional customs duty incentives. QIPs are entitled to the following exemptions on import duties and taxes as
applicable:
• Exemption from customs duties, specific taxes, and the VAT on imports of construction materials, construction
equipment, and production equipment for use in their production line
• Exemption from customs duties, specific taxes, and the VAT on imports of production inputs for export QIPs
and supporting industry QIPs to serve their production line
• Exemption from customs duties, specific taxes, and the VAT on imports of production inputs for specific
domestic QIPs to serve their production line.
Investment expansion by QIPs to increase existing production, downstream diversification, and technology upgrades
that improve productivity and protect the environment, will receive a corporate income tax exemption of from 3 to 9 years.
The investment incentives introduced will likely increase the tax system’s complexity and curtail the tax base,
resulting in increased tax expenditures. Incentives would ideally be granted only when not redundant. To identify
these cases, an omniscient and incorruptible tax administration would be needed. In practice, it is therefore preferable
to have clear criteria for granting tax incentives. For transparency, it is also advised to keep all incentives in the tax law.1
Source: Council for the Development of Cambodia; https://cdc.gov.kh/laws-and-regulations/.
1/ IMF Working Paper “Tax Incentives in Cambodia”. 2018. See https://www.imf.org/-/media/Files/Publications/WP/2018/wp1871.ashx

Performance of imports of basic construction that the real estate and property market has started
materials mainly steel, cement, and construction to recover. The housing market boom during the
equipment, remained subdued. During the first pre-pandemic period already created excess supply,
eight months of 2023, imports of steel used mainly given the country’s relatively small domestic market.
for property development projects and other
construction industries recovered, growing at 4
percent in value terms. In volume terms, steel imports CROP PRODUCTION
rose 15.4 percent. However, imports of construction
equipment and cement contracted at 4.2 percent and ACCELARATED
38.8 percent, respectively, in value terms. In volume
Despite less favorable weather conditions with
terms, while imports of cement grew at 6.7 percent,
erratic rainfall, as of mid-July 2023, rice crop
imports of construction equipment contracted by
cultivation improved, reaching 2.1 million
25.9 percent. Therefore, it is too early to conclude

Cambodia Economic Update November 2023 15

 hectares or an 18.0 percent y/y increase.9 Cultivation mainly non-aromatic paddy, mango, banana, and
of horticulture and industrial crops reached 0.7 million coconut. The agriculture sector therefore continues
hectares, a contraction of 0.9 percent y/y. 10 In 2023, dry to play a strategic role in maintaining the availability
season rice production reached 2.7 million metric tons of food and achieving food security, although the
or a 4.5 percent y/y decline. However, this year’s dry share of agriculture in GDP declined to 22 percent in
season rice yield improved, rising to 4.6 metric tons per 2022, down from 33.5 percent a decade ago, due to
hectare or a 2.5 percent increase. Rubber production the country’s structural transformation.
reached 60,000 metric tons or a 21 percent y/y increase
during the first two months of 2023.
According to the 2020 Cambodia Agriculture AGRICULTURAL EXPORT
Survey, 2.04 million household agricultural
holdings or 57 percent of all households
PERFORMANCE IS MIXED
in Cambodia, are involved in agricultural Cambodia’s milled rice exports reached US$278
production.11 This indicates that despite efforts to million or an 11.7 percent y/y increase during
move toward export-oriented commercial agriculture, the first eight months of 2023. Rubber exports
the country’s agriculture sector remains subsistence. amounted to US$232.7 million or a 5.1 percent decline,
More than half of Cambodian households continued while banana exports reached US$122.4 million or
to depend on subsistence agriculture for their a 12.6 percent decline. According to the Cambodia
livelihoods. Home consumption was reported as the Rice Federation, during the first seven months of
main agricultural product destination by 61 percent 2023, estimated earnings from agricultural product
of the household holdings in Cambodia, while exports were US$2,629 million or 22.3 percent of total
the other 39 8-month
percent
8-month mentioned that agricultural
2020
2020 goods (excluding gold) exports, of which (paddy and
production was 8-month
mostly2021
for sale. The survey estimated
8-month 2021 milled) rice exports and non-rice exports accounted for
8-month2022
2022
that approximately
8-month 94
2023percent of the 2,038,000
8-month2023 US$817 million and US$1,811 million, respectively.12
8-month
household agricultural holdings were growing crops, In August 2023, domestic prices of paddy and milled

Figure 13. Imports

Figure Imports of consumer and and durable goods
goods Figure 14. Inflation edged up
Figure13. 13. Importsofofconsumer
consumer anddurable
durable goods Figure 14. edged
Figure 14. Inflation Inflation edged up
up Contribution to
(YTD,y/y
(YTD, y/ypercent
percentchange)
change) Contributionto
Contribution to12-month
12-monthinflation
inflation
(year to date, y/y percent change) 12-month inflation (percentage points)
8-month2020
2020 8-month
8-month2021 8-month 2022
2021 8-month 8-month 2023
(percentage points) (percentage points)
8-month 2022 8-month 2023 10 Others
10 Others
140,0
140,0 Transportsub-index
sub-index
Transport
Housing&&utilities
utilitiessub-index
sub-index
120,0
120,0 88 Housing
Food sub-index
Food sub-index
100,0
100,0 Headlineinflation
inflation(y/y)
(y/y)
Headline
80,0 66 Aug-23,
Aug-23,
80,0 3.2
3.2
60,0
60,0 44
40,0
40,0
20,0 22
20,0
0,0
0,0 00
-20,0
-20,0
-40,0
-40,0 -2-2
Jan-13
Aug-13
Mar-14
Oct-14
May-15
Dec-15
Jul-16
Feb-17
Sep-17
Apr-18
Nov-18
Jun-19
Jan-20
Aug-20
Mar-21
Oct-21
May-22
Dec-22
Jul-23
Jan-13
Aug-13
Mar-14
Oct-14
May-15
Dec-15
Jul-16
Feb-17
Sep-17
Apr-18
Nov-18
Jun-19
Jan-20
Aug-20
Mar-21
Oct-21
May-22
Dec-22
Jul-23

-60,0
-60,0
CC niene

dtrd e
s

PaP trocry t
sneg e le

TrT r

DD e

koik el
sas
GG kck
GG tffuff

oto etn
FoF knsk

acra
t

en
sases ccyl c

CC esies
SoS aertteet

l
gag
urcu

inli
MM mrmen
ic

inri

recr

oslo
sdtus
edce

nign
i
neg
gr

asa
ara
ede

oodo
igai
MM

fot f

ooo

Source: Cambodian authorities. Source: Cambodian authorities.

Note: y/y = year on year. Note: y/y = year on year.

Figure15.
Figure 15. The
Thecurrent
currentaccount
accountimproved
improved Figure16.
Figure 16. The
Therriel
iel appreciated
appreciatedagainst
againstregional
regional
(percent of GDP)
(percent of GDP) currencies
currencies
9 July 2023 Agriculture Production, the Agricultural Marketing Office, Department of Planning and Statistics, the Ministry of Agriculture, Forestry &
6.0
6.0 4.5 Riel per baht
Fisheries; https://amis.maff.gov.kh/en/article/171 and https://elibrary.maff.gov.kh/book/64546bc5126ad.
4.5 Rielper
perYuan
Yuan(RHS)
(RHS)
FDI(RHS)
FDI (RHS) CAB
CAB 140 Riel per baht
140
Riel 650
650
4.0
104.0Ministry of Agriculture, Forestry and Fisheries 2023a.
130 640
640
2.0
112.0National Institute of Statistics, Ministry of Planning 2020. 4.0 130
4.0 630
Cambodia Rice Confederation 2023.
12 0.0 120 630
0.0 120 620
-2.0 620
-2.0 3.5 110
110 610
3.5 610
-4.0
-4.0 100
100 600
600
16 -6.0 Cambodia Economic Update November 2023
-6.0 590
3.0
3.0 90 590
-8.0 90
-8.0 580
-10.0 80 580
-10.0 80 570
570
rice surged, rising at 30 percent and 10 percent, especially tourism receipts, remained relatively weak,
respectively as global rice prices skyrocketed to 12-year despite the revival of international arrivals. Given
highs. The price of Thai rice 5 percent broken reached that domestic consumption accounts for about two-
US$635 per metric ton, a 12-year high since the last thirds of GDP, its moderation produced noticeable
global oil and food price shock, when the price peaked negative impacts. The easing of private consumption
at US$907 per metric ton in April 2008.13 The price has already resulted in a marked slowdown in retail
8-month 2020
2020
of fragrant rice8-month
and soft
8-month 2021
2021
white rice was US$780 and and wholesale activities as reflected by the decline in
8-month
US$520 per metric ton,
8-month
8-month respectively.
2022
2022 consumer and durable goods imports.
8-month 2023
8-month 2023
Imports of consumer and durable goods slowed.
During the first eight months of 2023, imports of
PRIVATE
Figure 13.
13. Imports
CONSUMPTION
Imports of
of consumer
consumer andand durable
durable goods
goods main consumer goods
Figure 14. such as soft
Inflation drinks,
edged up medicine,
Figure Figure 14. Inflation edged up
EASED (YTD, AS
(YTD,PENT-UP
y/y percent
y/y percent change)
change) gasoline, and diesel contracted
Contribution to
Contribution
percent, 5.2 percent,(percentage
to 12-month by 7.5 percent, 6.6
12-month inflation
and 14.3 percent
inflation
y/y, respectively
(percentage points)
points)
DOMESTIC
8-month 2020
8-month 2020 8-month DEMAND
8-month 2021
2021 8-month 2022
8-month IS
2022 8-month
8-month 2023
2023 (figure
10 13). Similarly,
10 Others
Others
imports of durable goods such
as passenger Transport
cars, motorcycles, and trucks contracted
RUNNING
140,0
140,0
120,0
OUT OF STEAM Transport
by 8820.4 percent,
Housing43.7
Housing &
sub-index
sub-index
percent,
& utilities
utilities sub-indexand 43.0 percent,
sub-index
120,0
Food sub-index
sub-index
Private
100,0
100,0 consumption, which surged in 2022, respectively.Food
Households
Headline inflation
face slow wage growth,
inflation (y/y)
(y/y)
6 Headline
driven
80,0
80,0 by one-off pent-up demand after a with only a 3 percent increase in the minimum wage
6 Aug-23,
Aug-23,
3.2
complete
60,0 removal of COVID-19-related mobility of the formal sector and slack growth in the labor
3.2
60,0 44
restrictions,
40,0 is running out of steam. As discussed, market, cutting back on consumption, which has
40,0
the country’s manufacturing exports weakened partly
22 been squeezed by higher borrowing costs and
20,0
20,0
during the fourth quarter of 2022 to the second prices. Although high-frequency import data can
0,0
0,0
quarter of 2023, impacting wages and earnings. The serve00 as a proxy for private consumption on durable
-20,0
-20,0
manufacturing sector alone shed a net 40,000 jobs and nondurable goods, an in-depth analysis cannot
-2
-40,0
-40,0
or 5 percent of total manufacturing employment. be -2conducted due to the nonavailability of actual
Jan-13
Aug-13
Mar-14
Oct-14
May-15
Dec-15
Jul-16
Feb-17
Sep-17
Apr-18
Nov-18
Jun-19
Jan-20
Aug-20
Mar-21
Oct-21
May-22
Dec-22
Jul-23
Jan-13
Aug-13
Mar-14
Oct-14
May-15
Dec-15
Jul-16
Feb-17
Sep-17
Apr-18
Nov-18
Jun-19
Jan-20
Aug-20
Mar-21
Oct-21
May-22
Dec-22
Jul-23
-60,0
This
-60,0 does not bode well for consumer spending. In private consumption expenditure data, especially
CC nnee

e
FFoo ninkkss

oott ntt

esenn cclele
aarr

ee

kki i l
ss
GG kk
GG uffff

CC ieiesese

ggaa
l
SSoo ettet

inin
urucc
MM mmeen

rrcc
ii

y
eecc

ool l
stsut

retail sales data, to gauge consumer demand for

nngg
PPa oorcrcy
arer
ddrr

DD

addition, market liquidity continues to be constrained

i

ggee

TTr

aass
eedd

aarr
oodd
igiga
ftft
MM

oooo

finished goods.
ass

by interest rate hikes (see more discussion under the

monetary section below), while the services exports,

Figure
FigureFigure 15. current
15.
15. The The current
The current account
account
account improved
improved
improved Figure16.
Figure
Figure 16.The
16. Theriel
The rr iel
ielappreciated
appreciatedagainst
appreciated against regional
against regional
regional
(percent of
(percent of GDP)
GDP) currencies
currencies
(percent of GDP) currencies
6.0
6.0 4.5
4.5 Riel per
Riel per baht
baht Riel per
Riel per Yuan
Yuan (RHS)
(RHS)
FDI (RHS)
FDI (RHS) CAB
CAB 140
140 650
650
4.0
4.0
130 640
640
2.0
2.0 4.0 130
4.0 630
0.0 630
0.0 120
120
620
620
-2.0
-2.0 110
3.5
3.5 110 610
610
-4.0
-4.0
100
100 600
600
-6.0
-6.0
3.0
3.0 90 590
590
-8.0 90
-8.0 580
580
-10.0
-10.0 80
80
570
570
-12.0 2.5
2.5
-12.0 70
70 560
560
-14.0
-14.0 60
60 550
550
-16.0 2.0
May-19

May-20

May-21

May-22

May-23
Jan-19

Jan-20

Jan-21

Jan-22

Jan-23
Sep-19

Sep-20

Sep-21

Sep-22

Sep-23

-16.0 2.0
May-19

May-20

May-21

May-22

May-23
Jan-19

Jan-20

Jan-21

Jan-22

Jan-23
Sep-19

Sep-20

Sep-21

Sep-22

Sep-23
16Q1
16Q3
17Q1
17Q3
18Q1
18Q3
19Q1
19Q3
20Q1
20Q3
21Q1
21Q3
22Q1
22Q3
23Q1
16Q1
16Q3
17Q1
17Q3
18Q1
18Q3
19Q1
19Q3
20Q1
20Q3
21Q1
21Q3
22Q1
22Q3
23Q1

Sources: Cambodian authorities and World Bank staff estimates. Source: Cambodian authorities.
Note: CAB = current accounts balance; FDI = foreign direct investment; Q = Note: RHS= right-hand scale.
quarter; RHS = right-hand scale.
Figure 17.
Figure 17. Broad
Broad money
money growth
growth eased
eased Figure 18.
Figure 18. U.S.
U.S. interest
interest rates
rates increased
increased
Contribution to
Contribution to broad
broad money
money growth
growth (percent per
(percent per year)
year)
(percentage points)
(percentage points)
60 99 Fed Funds
Funds Rate
Rate
60 World Bank Pink Sheet (commodity price data); https://www.worldbank.org/en/research/commodity-markets.
13 Fed Prime Rate
Prime Rate
Foreign currency
Foreign currency deposits
deposits (other
(other deposits)
deposits)
50
Transferable deposits
Transferable deposits 88
50
Currency in
Currency in circulation
circulation
77
M2 y/y,
M2 y/y, percent
percent change
change
40
Cambodia
40 Economic Update November 2023
66
17
Pre-pandemic historical
Pre-pandemic historical average
average (5
(5 years)
years)
30
30 55

20
44
 Figure
Figure13.
13. Imports
Importsofofconsumer
consumer andanddurable
durable goods
goods Figure
Figure14.
14. Inflation
Inflationedged
edgedupup
(YTD,
(YTD,y/yy/ypercent
percentchange)
change) Contribution
Contributiontoto12-month
12-monthinflation
inflation
(percentage
(percentagepoints)
points)
8-month
8-month2020
2020 8-month
8-month2021
2021 8-month
8-month2022
2022 8-month
8-month2023
2023
1010 Others
Others
140,0
140,0 Transport
Transportsub-index
sub-index
120,0
120,0 88 Housing
Housing&&utilities
utilitiessub-index
sub-index
rice prices remained stable as Cambodia is a net rice
INFLATION
100,0
100,0 EDGED UP, exporter.
Food
Foodsub-index
sub-index
Similarly,
Headline global
Headlineinflation oil prices recently picked
inflation(y/y)
(y/y)
66
DUE
80,0
80,0 TO THE RECENT up, but retail prices of gasoline and diesel remained
3.23.2
Aug-23,
Aug-23,

relatively stable. This helps contain inflation.

UPTICK
60,0
60,0
40,0
40,0
IN OIL AND FOOD 44

Subdued inflation in Cambodia’s main import

PRICES
20,0
20,0
22
partners, Thailand, Vietnam, and China, which
0,0
0,0
As food prices edged up, Cambodia’s Consumer reached
00 0.8 percent, 2.9 percent, and 0.1 percent
-20,0
-20,0
Price Index (CPI) accelerated to 3.2 percent y/y y/y in August 2023, helped contain domestic
-2-2
in-40,0
-40,0
August 2023 (figure 14), up from its trough price pressures. Among other ASEAN members,

Jan-13
Jan-13
Aug-13
Aug-13
Mar-14
Mar-14
Oct-14
Oct-14
May-15
May-15
Dec-15
Dec-15
Jul-16
Jul-16
Feb-17
Feb-17
Sep-17
Sep-17
Apr-18
Apr-18
Nov-18
Nov-18
Jun-19
Jun-19
Jan-20
Jan-20
Aug-20
Aug-20
Mar-21
Mar-21
Oct-21
Oct-21
May-22
May-22
Dec-22
Dec-22
Jul-23
Jul-23
-60,0
-60,0
of 0.7 percent y/y in March during the post- only Lao PDR experienced high inflation of 25.9
C cinne
Ciga e
So gareette
Soft tte
Fo rinnks
Food ks

Mot ent
Pa otoorcy t
Passe rcycle
nger e
cr
Tr ar

ol ne
D ne
Coo esel
ooki l

gas
s
G uck
Gaso k
G stuff
Garm ff

C Diiese
M armen

ng ga
er ca
sseng cl

Truc
u
ei

as li
i
edec

od st
ft dri

king
percent in August 2023. Inflation rates in Malaysia
i r

pandemic period. Inflation peaked at 7.8 percent, a

d
Med
M

13-year high in June 2022, caused largely by rapidly and Singapore were 2.0 percent and 4.0 percent y/y,
rising prices of food and petroleum products resulting respectively, in August 2023. In addition, the relatively
from the global food and oil price shock. The recent stable Cambodian riel compared to the U.S. dollar
upticks in food
Figure
Figure 15.prices,
15. The particularly
Thecurrent
currentaccountofimproved
account meat, fish, fresh
improved exchange
Figure
Figure16.rate closely
16. The r ielmaintained
Ther iel appreciated by
appreciatedagainst theregional
against central
regionalbank
(percent
(percentof
ofGDP)
GDP)
fruits, and vegetables, pushed up inflation, given the helps promote overall price stability. This protects
currencies
currencies
fact 6.0that the food component (subindex) captures
6.0 4.5a
4.5 the value
Riel
and
Rielper
purchasing
perbaht
baht
power
Riel
Rielper
perYuan
of (RHS)
riel-denominated
Yuan(RHS)
percent FDI
434.04.0 FDI(RHS)
weight(RHS) CAB
CAB basket.
of the inflation assets
140 (those who earn income in riel) – one of the
140 650
650

2.0
2.0
main
130
130 objectives of pegging the riel to the dollar. The
640
640
The contribution of the food subindex 4.0 to
4.0
economy is highly dollarized. So, devaluation of local 630
630
0.0
0.0 120
120
inflation rose to 2.3 percentage points in August currency, which often causes inflation to rise, is not 620
620
-2.0
-2.0
2023, up from 2.1 percentage points in December 3.5
3.5 110
110
feasible in any circumstances in Cambodia as it will 610
610
-4.0
-4.0 During the same period, the contribution of the
2022. drive
100 the economy to full dollarization.
100 600
600
-6.0
-6.0
housing and utilities subindex rose to 0.2 percentage
3.0
3.0 9090 590
590
points,
-8.0
-8.0 up from 0.1 percentage points, thanks to Although the global economy is in a much better 580
580
rising
-10.0 costs of maintenance and repairs of dwellings.
-10.0 position
8080 than it was in the 1970s to cope with570
a570
-12.0contribution of the transport subindex shrank2.5
The
-12.0 2.5
to major
7070 oil-price shock, an escalation of the latest
560
560
zero,
-14.0 down from 0.1 percentage points. Cambodia’s
-14.0 conflict
6060
in the Middle East—which comes on top
550
550
CPI,
-16.0 excluding food, remained largely unchanged
-16.0 2.0
2.0 of disruptions caused by the Russian invasion of
May-19
May-19

May-20
May-20

May-21
May-21

May-22
May-22

May-23
May-23
Jan-19
Jan-19

Jan-20
Jan-20

Jan-21
Jan-21

Jan-22
Jan-22

Jan-23
Jan-23
Sep-19
Sep-19

Sep-20
Sep-20

Sep-21
Sep-21

Sep-22
Sep-22

Sep-23
Sep-23
Ukraine—could push global commodity markets
16Q1
16Q1
16Q3
16Q3
17Q1
17Q1
17Q3
17Q3
18Q1
18Q1
18Q3
18Q3
19Q1
19Q1
19Q3
19Q3
20Q1
20Q1
20Q3
20Q3
21Q1
21Q1
21Q3
21Q3
22Q1
22Q1
22Q3
22Q3
23Q1
23Q1

at 2.0 percent y/y during the period. Although

global rice prices have recently inched up, domestic into uncharted waters, according to the World

FigureFigure
Figure17.
17. Broad
17. Broad Broad
money money
money growth
growth
growth easedeased
eased Figure
Figure 18. Figure18.
U.S. 18. U.S.
U.S.interest
interest interest
rates
ratesincreased
rates increasedincreased
Contribution
Contribution
Contribution to broadtoto
broad
broadmoney
money moneygrowth
growth growth (percent per year) (percent
(percentperperyear)
year)
(percentage points)(percentage
(percentagepoints)
points)
6060 99 Fed
FedFunds
FundsRate
Rate Prime
PrimeRate
Rate
Foreign
Foreigncurrency
currencydeposits
deposits(other
(otherdeposits)
deposits)
Transferable
Transferabledeposits
deposits 88
5050
Currency
Currencyinincirculation
circulation 77
4040
M2
M2y/y,
y/y,percent
percentchange
change
Pre-pandemic
Pre-pandemichistorical
historicalaverage
average(5(5years)
years) 66

3030 55
44
2020
33
1010 22
00 11
00
-10
-10
Apr-10
Apr-10

Apr-17
Apr-17
Aug-05
Aug-05

Aug-12
Aug-12

Aug-19
Aug-19
Nov-10
Nov-10

Nov-17
Nov-17
Jun-11
Jun-11

Jun-18
Jun-18
Jul-08
Jul-08

Jul-15
Jul-15

Jul-22
Jul-22
Jan-05
Jan-05

Jan-12
Jan-12

Jan-19
Jan-19
Mar-06
Mar-06

Mar-13
Mar-13

Mar-20
Mar-20
May-07
May-07
Oct-06
Oct-06

Feb-09
Feb-09

May-14
May-14

May-21
May-21
Sep-09
Sep-09

Oct-13
Oct-13

Feb-16
Feb-16
Sep-16
Sep-16

Oct-20
Oct-20

Feb-23
Feb-23
Sep-23
Sep-23
Dec-07
Dec-07

Dec-14
Dec-14

Dec-21
Dec-21
Apr-15
Apr-15

Apr-18
Apr-18

Apr-21
Apr-21
Jul-14
Jul-14

Jul-17
Jul-17

Jul-20
Jul-20

Jul-23
Jul-23
Jan-13
Jan-13

Jan-16
Jan-16

Jan-19
Jan-19

Jan-22
Jan-22
Oct-13
Oct-13

Oct-16
Oct-16

Oct-19
Oct-19

Oct-22
Oct-22

Source: Cambodian authorities. Source: United States Federal Reserve.

18 Cambodia Economic Update November 2023

Bank’s latest Commodity Markets Outlook.14 A
major oil-price shock could quickly drive inflationary
pressures in Cambodia, while complicating efforts by
the U.S. Federal Reserve and other central banks to
tame inflation. Last year, Cambodia’s CPI surged, led
by rising food and oil prices triggered by the Russia-
Ukraine war. In June 2022, headline inflation rose to
7.8 percent, a 13-year high, caused largely by rapidly
rising prices of food and petroleum products. The
spillover effects of the food and oil price shock caused
rising costs of other goods, labor, and fees.
THE CURRENT ACCOUNT
BALANCE IMPROVED AS
IMPORTS MODERATED
Despite weakening goods export performance,
the current account balance improved, thanks
largely to moderate import growth. Based on the
central bank’s quarterly balance of payments data,15
the current account recorded a surplus of 1.3 percent
of GDP (US$0.4 billion) in the second quarter of
2023, compared to a deficit of 8.9 percent of GDP
(US$2.7 billion) during the same period in 2022
(figure 15). The quarterly current account surplus of
1.3 percent of GDP occurred for the first time since
the second quarter of 2022, when the current account
surplus was 0.3 percent of GDP (US$0.1 billion),
which indicates an improvement of Cambodia’s
external sector performance after the current account
deficit is estimated to have hit rock bottom at 42.6
percent of GDP in 2021. The current account surplus
recorded in the second quarter of 2023 is due largely
to a reduction in the deficit of the balance on goods.
The trade deficit narrowed to US$0.48 billion in the
second quarter of 2023, down from US$0.51 billion
during the same period in 2022. In addition, the
services account also registered a surplus of US$0.37
billion, up from a deficit of US$0.24 billion during
the same period, thanks mainly to accelerated growth
in services exports, especially tourism receipts, as the
pandemic is now behind us.
14 Press Release October 30, 2023 Conflict in Middle East Could Bring ‘Dual Shock’ to Global Commodity Markets. See https://www.worldbank.org/
en/news/press-release/2023/10/26/commodity-markets-outlook-october-2023-press-release
15 National Bank of Cambodia 2023a.
16 National Bank of Cambodia 2023b.
17 Announcement dated September 18, 2023. See https://www.nbc.gov.kh/download_files/news_and_events/announ_kh/Announcement_
ExchangRate180923.pdf
Cambodia Economic Update November 2023
As a result, Cambodia’s balance of payments
showed a surplus of 1.4 percent of GDP (US$0.5
billion) from a deficit of 8.8 percent of GDP
(US$2.6 billion) during the same period. Net
FDI is estimated to have risen to 3.3 percent of GDP
(US$1.07 billion) in the second quarter of 2023, up
from 2.7 percent of GDP (US$0.8 billion) during the
same period in 2022. During the first half of 2023,
net FDI accounted for 6.9 percent of GDP (US$2.24
billion), up from 5.2 percent of GDP (US$1.57
billion) during the same period in 2022. Continued
FDI inflows and concessional financing largely cover
external financing needs (see more discussion on
concessional financing-debt disbursement under the
fiscal section, below).
THE EXCHANGE RATE
REMAINED UNDER
PRESSURE
The riel-U.S. dollar exchange rate was under
increased pressure as exports eased and foreign
currency deposits slowed. The current account
balance deteriorated in the third quarter of 2023,
following a current account surplus recorded in
the second quarter. However, the exchange rate
continued to be broadly stable, reaching 4,122 riel per
U.S. dollar in September 2023, thanks to intervention
by the central bank under its open market operation.16
During September–October 2023, through its open
market operation, the central bank injected US$70
million into the market to maintain the riel-U.S.
dollar exchange rate at 4,000 riel per U.S. dollar
within the targeted range of ±2 percent.17 Since the
start of the U.S. Federal Reserve’s interest rate hikes
to keep rapid inflation from becoming entrenched
(see the monetary section, below, for more discussion
on rising interest rates), the riel-U.S. dollar exchange
rate has been under increased pressure. Given that the
economy is highly dollarized, maintaining exchange
rate stability helps maintain the purchasing power of
those who earn income in riel, while preventing full
dollarization.
19
 However, pegging the riel to the strong dollar
resulted in the appreciation of the local currency
against many regional country currencies,
especially the Chinese yuan, the Thai baht, and
the Vietnamese dong. In August 2023, the riel-
yuan and riel-baht exchange rates appreciated to 568
riel per Chinese yuan and 112.5 riel per Thai baht,
up from 608 riel per Chinese yuan and 125 riel per
Thai baht (figure 16), respectively, at the end of
2022. Similarly, the riel-dong exchange appreciated
to 0.17 riel per Vietnamese dong, up from 0.175 riel
per Vietnamese dong. The riel-Canadian dollar, riel-
euro, and riel-pound exchange rates also appreciated,
reaching 3,068 riel per Canadian dollar, 4,358 riel per
euro, and 5,040 riel per British pound, respectively,
in September 2023, up from 3,077 riel per Canadian
dollar, 4,468 riel per euro, and 5,083 riel per British
pound, respectively, at the end of 2022. This does not
bode well for Cambodia’s external competitiveness for
both goods and services exports, especially tourism.
BROAD MONEY GROWTH
CONTINUED TO
DECELERATE
Broad money growth slowed, likely reflecting
global financial tightening possibly together
with the central bank’s reserve requirement
hike. Amid the sharp tightening of global financial
conditions driven largely by the U.S. Federal
Reserve’s interest rate hike to a 22-year high to
rein in high inflation, broad money (M2) growth
slowed. Although Cambodia’s highly dollarized
economy limits the ability of the country’s central
bank, the National Bank of Cambodia, to influence
money aggregate, the recent increase in the reserve
requirement ratio, one of a few monetary policy
instruments available to influence the money supply,
may partially affect market liquidity. The reserve
requirement ratio for foreign currency of banks
and financial institutions was raised to 9 percent in
January 2023, from 7 percent, reportedly to maintain
resilience of the banking and financial sector, although
the 2022 Financial Stability Review indicated that the
banking system remained sound and resilient.
Broad money growth expanded at 11.0 percent
in August 2023, down from 12.0 percent
during the same period in 2022, as foreign
currency deposit growth slowed (figure 17).
The contributions of foreign currency deposits (and
other deposits), transferrable deposits, and currency
in circulation accounted for 10.8 percentage points,
negative 0.5 percentage points, and 0.8 percentage
points, respectively, in August 2023, down from
11.6 percentage points, 1.1 percentage points, and
negative 0.8 percentage points, respectively, during
the same period in 2022. The positive growth rate
of currency in circulation reflected injection of local
currency by the central bank to the market during the
first half of 2023.

Figure
Figure 19.
Figure1 9.
1Domestic
9.Domestic
Domestic interest
interest
interest rates
rateswere
rates were
were
under
under increased Figure
under 20.
Figure
Figure
20.20.
Concentration
Concentration
Concentration ofofcredit
of
c credit
redit
ininreal
in
realreal
estate
estate
estate
pressure increased
increasedpressure
pressure Contribution
ContributionContributionto to
to domesticdomestic
domestic
credit credit
credit
growth growth
growth
(percent) (percent)
(percent) (percentage points) (percentage
(percentage points)
points)
U.S. dollar
U.S. denominated
dollar term
denominated deposit
term raterate
deposit Agriculture
Agriculture CRM
CRM
12.0
12.0
U.S. dollar
U.S. denominated
dollar term
denominated lending
term raterate
lending Manufacturing
Manufacturing Wholesale & retail
Wholesale & retail
11.0
11.0
Hotels
Hotels andand restaurants
restaurants Other
Other Total
Total
10.0
10.0
36 36
9.09.0
31 31
8.08.0
26 26
7.07.0
21 21
6.06.0
16 16
5.05.0 11 11
4.04.0 6 6
3.03.0 1 1
Jan-19
Jan-19
Apr-19
Apr-19
Jul-19
Oct-19
Jul-19
Oct-19
Jan-20
Jan-20
Apr-20
Apr-20
Jul-20
Oct-20
Jul-20
Oct-20
Jan-21
Jan-21
Apr-21
Apr-21
Jul-21
Oct-21
Jul-21
Oct-21
Jan-22
Jan-22
Apr-22
Apr-22
Jul-22
Oct-22
Jul-22
Oct-22
Jan-23
Jan-23
Apr-23
Apr-23
Jul-23
Jul-23

-4 -4
Jan-15
Jan-15
Jul-15
Jul-15
Jan-16
Jan-16
Jul-16
Jul-16
Jan-17
Jan-17
Jul-17
Jul-17
Jan-18
Jan-18
Jul-18
Jul-18
Jan-19
Jan-19
Jul-19
Jul-19
Jan-20
Jan-20
Jul-20
Jul-20
Jan-21
Jan-21
Jul-21
Jul-21
Jan-22
Jan-22
Jul-22
Jul-22
Jan-23
Jan-23
Jul-123
Jul-123

Source: Cambodian authorities. Source: Cambodian authorities.

Note: CRM = construction, real estate, and mortgage.

Figure
Figure
21.21.Central
Central
government
government domestic
domestic revenue
revenue Figure 22.22. Central
Figure Central
government
government expenditure
expenditure
Contribution
Contributionto to
growth
growth Contribution
Contributionto to
growth
growth
20 (percentage
(percentage
point)
point) (percentage
(percentage
Cambodia point)
point)
Economic Update November 2023
Non-tax
Non-tax
(and
(and
other)
other)
revenues
revenues 25 25 Capital
Capital
expenditures
expenditures
Taxes
Taxes
on on
international
international
trade
trade Goods
Goodsandand
Services
Services
30 30 Taxes
Taxes
on on
goods
goods
andand
services
services
Wages
Wages
andand
Compensation
Compensation
 PRESSURE ON DOMESTIC CREDIT GROWTH
INTEREST RATES SHARPLY EASED, BUT
INTENSIFIED CONCENTRATION OF
Upward pressure on domestic interest rates CREDIT IN REAL ESTATE
continued, due to tightening global financial
conditions. Cambodia’s interest rates increase
CONTINUED
further as the country imports the U.S. monetary Despite a significant slowdown in credit growth,
policy tightening, due to the Federal Reserve’s concentration of credit in real estate remained.
aggressive action to tame inflation. There have been Credit growth sharply decelerated to 7.7 percent y/y, a
rising funding costs for banks and microfinance 13-year low in August 2023, down from 22.7 percent
institutions
Figure 1 9.
in Cambodia, as rates
they need to increase during the20.same period in 2022. The domestic credit
Figure
interest 1 9.Domestic
rates onDomestic
deposits
interest
interest
to
were under
ratesdepositors.
attract were under
This
Figure
Figure 20.Concentration
Concentration of of
c credit
reditin in
realreal
estate
estate
increased pressure growth rate is
Contributionnow broadly
to to in
domestic line
credit with
growth nominal
increased pressure Contribution domestic credit growth
has pushed up their operating (percent)
(percent)
costs, squeezing their GDP growth. However, the
(percentage share
points)of
(percentage points) domestic credit
profit margins. In August 2023, the weighted average financing the construction, real estate, and mortgage
U.S. dollar denominated term deposit raterate
interest
12.0
12.0 rates
U.S.
U.S.
ofdenominated
dollar
dollar
U.S. dollar-denominated
denominated term
term
deposit
lending raterate
term Agriculture
sector CRM
combined in total outstanding
Agriculture CRM domestic credit
U.S. dollar denominated term lending Manufacturing Wholesale & retail
deposits
11.0
11.0 almost doubled, rising to 5.71 percent per remained the
Manufacturing
Hotels andand largest andOther
restaurants continuedretail
Wholesale & to Total
increase,
Hotels restaurants
year,
10.0
10.0
up from 3.0 percent per year in January 2021 Other
accounting for 35.2 percent of total outstanding Total

(figure 36 36
9.09.0 19). High interest rates reduce the overall level domestic credit, which stood at US$47.0 billion by
of domestic demand, while encouraging domestic 31 31
8.08.0 August 2023, up from 33.8 percent during the same
26 26
saving
7.07.0 as consumers can receive higher returns on period in 2022, according to the data on credit granted
21 21
their
6.06.0
savings. The negative impact on economic by deposit money banks classified by industry. This
16 16
activity of the current monetary policy tightening contributed 4.4 percentage points to the 8.5 percent
5.05.0 11 11
cycle has started to materialize. Investment and of the total domestic credit increase in August
4.04.0 6 6
consumer spending are being harmed by the current 2023 (figure 20). In 2023, possibly pointing to an
3.03.0 1 1
monetary policy tightening cycle. increase in real estate speculation activity, rising and
Jan-19
Apr-19
Jul-19
Oct-19
Jan-20
Apr-20
Jul-20
Oct-20
Jan-21
Apr-21
Jul-21
Oct-21
Jan-22
Apr-22
Jul-22
Oct-22
Jan-23
Apr-23
Jul-23

-4 -4
Jan-19
Apr-19
Jul-19
Oct-19
Jan-20
Apr-20
Jul-20
Oct-20
Jan-21
Apr-21
Jul-21
Oct-21
Jan-22
Apr-22
Jul-22
Oct-22
Jan-23
Apr-23
Jul-23

Jan-15
Jul-15
Jan-16
Jul-16
Jan-17
Jul-17
Jan-18
Jul-18
Jan-19
Jul-19
Jan-20
Jul-20
Jan-21
Jul-21
Jan-22
Jul-22
Jan-23
Jul-123
concentrating domestic credit in the construction and
Jan-15
Jul-15
Jan-16
Jul-16
Jan-17
Jul-17
Jan-18
Jul-18
Jan-19
Jul-19
Jan-20
Jul-20
Jan-21
Jul-21
Jan-22
Jul-22
Jan-23
Jul-123
real estate sector continued, despite rising borrowing
costs and the easing of construction activity after the
construction boom stalled amid the pandemic.

Figure
Figure
Figure 21.
21.
21.Central
Central
Centralgovernment
government
governmentdomestic
domesticrevenue
domestic revenue
revenue Figure 22.22.
Figure 22. Central
Central
Figure government
government
Central expenditure
expenditure
government expenditure
ContributionContribution
growth to to
toContribution growth
growth Contribution to Contribution
growth to to
Contribution growth
growth
(percentage point) (percentage point)
(percentage point) (percentage point) (percentage point)
(percentage point)
Non-tax
Non-tax(and other)
(and revenues
other) revenues 25 25 Capital expenditures
Taxes on international trade Capital expenditures
Taxes on international trade Goods
Goodsandand
Services
Services
30 30 Taxes on on
Taxes goods andand
goods services
services 20 20 19.9 Wages and Compensation
Wages and Compensation
24.3 Direct revenues
Direct revenues 19.9
24.3 23.8 Expenditures
Domestic
Domestic revenues
revenues 23.8 Expenditures
20 20 15 15
12.7
12.7
10 10
10 10 8.58.5 9.09.0

5 5
0 0 0.40.4
-2.6-2.6
0 0
-10-10 -3.6-3.6
-11.7
-11.7 -5 -5

-20-20 -10-10
8-m8-m
2019
2019 8-m8-m
2020
2020 8-m8-m
2021
2021 8-m8-m
2022
2022 8-m8-m
2023 8-m8-m
2019
2023 2019 8-m8-m
2020
2020 8-m8-m
2021
2021 8-m8-m
2022
2022 8-m8-m
2023
2023
Source: Cambodian authorities. Source: Cambodian authorities.

Figure 23.23.General
Figure Generalgovernment
government operations
operations Figure 24.24.General
Figure Generalgovernment
government surplus/deficit and
surplus/deficit and
(percent of of
(percent GDP)
GDP) financing
financing
(percent of of
(percent GDP)
GDP)
Total revenue (and grants) Total expenditure 10.0 Foreign financing Debt amortization
Total
Cambodia
Overall
revenue
balance
(and
Economic grants)November
Update Total expenditure
2023 10.0 Foreign financing Debt amortization 21
Overall balance Domestic
Domesticfinancing
financing Financing
Financing
35 35 8.08.0
30 30
6.0
 Credit growth is increasingly constrained as
banks face rising borrowing costs, due to sharp
rises in global interest rates. The risk of financial
stress in emerging market and developing economies
is intensifying amid elevated global interest rates,
according to the World Bank’s June 2023 Global
Economic Prospects report.18 The credit-to-GDP
ratio marginally declined to 174.0 percent in August
2023, down from 183.7 percent in December 2022.
The credit-to-GDP ratio was as low as 37.0 percent a
decade ago. However, a rapid expansion of domestic
credit, growing at an average rate of about 30 percent
a year that Cambodia experienced for almost a decade
during the pre-COVID-19 period boosted the credit-
to-GDP ratio to 116.7 percent in December 2019.
Despite negative impacts of COVID-19, the credit-
to-GDP ratio increased further during the pandemic,
to 183.7 percent in 2022. According to the midyear
2023 report of the National Bank of Cambodia, the
reported nonperforming loan ratios for the banking
and microfinance sectors were 4.0 percent and 3.1
percent, respectively, by mid-2023, up from 3.2
percent and 2.6 percent, respectively, by the end of
2022.19
In addition, Cambodia’s high private debt may
become a drag on the economy if borrowers
struggle to meet repayments. This is due to the
discontinuation of the loan rescheduling. Private
sector deposit growth also decelerated to 9.3 percent,
down from 15.1 percent during the same period. This
likely indicates that the ability of households and
businesses to save and place their funds with banks
has declined, despite rising deposit interest rates. The
slowdown in both credit and deposit growth helped
maintain the loan-to-deposit ratio, which stood at
135.0 percent in August 2023, down from 139.3
percent during the same period in 2022.
DOMESTIC REVENUE
COLLECTION SLOWED
After a rapid recovery in 2022, in part
reflecting gains from revenue administration
improvements, growth in government revenue
collection has slowed. An across-the-board
improvement in domestic revenue collection during
the post-pandemic period proved to be short-
lived as domestic economic activity decelerates
18 World Bank 2023c.
19 National Bank of Cambodia 2023c.
22
this year, mainly due to the slowdown in domestic
consumption. During the first eight months of 2023,
central government domestic revenue plateaued,
growing at 0.4 percent y/y, down from 23.8 percent
during the same period in 2022 (figure 21). Taxes
on goods and services hit hardest as domestic
consumption eased. Excises and duties on imports
declined with softening imports. International
trade taxes also eased. While continuing to perform,
the contribution of profit tax collection to central
government revenue growth shrank. Thanks to a
recovery of the service sector, in particular tourism
activity, non-tax revenues marginally improved.
BUDGET EXPENDITURES
CONTINUED TO INCREASE
Budget expenditures increased. Central
government expenditure accelerated, rising at 12.7
percent y/y during the first eight months of 2023
(figure 22), driven by civil servant wage increases,
election-related spending, and a continued capital
spending boost. A temporary public spending boost
financing the social sector, especially the health sector,
has been withdrawn as COVID-19-related health
expenditures have been phased out. The increase in
budgeted current spending reflects the reintroduction
of the across-the-board public sector wage increase.
The public sector wage increase was frozen during
2021–22 to save budgetary resources to finance rising
spending demand to mitigate impacts of COVID-19.
In addition, the government has increased social
security benefits for former civil servants and veterans.
The increases have been introduced for former civil
servants who received lower salaries when they were
working than current civil servants. The increase
in current expenditure is also needed to finance the
hosting of the 32nd Southeast Asian Games and
general election-related spending.
CASH TRANSFER
PROGRAMS CONTINUED
The authorities continued to provide cash
transfers for poor and vulnerable households.
In this regard, Cambodian authorities have extended
the COVID-19 cash transfer program, with an
Cambodia Economic Update November 2023
 Figure
Figure11 9.9. Domestic
Domesticinterest
interestrates
rates were
wereunder
under Figure
Figure20.
20. Concentration
Concentrationof
ofcc redit
redit ininreal
realestate
estate
increased
increasedpressure
pressure Contribution to domestic credit growth
Contribution to domestic credit growth
(percent)
(percent) (percentage
(percentagepoints)
points)
U.S.
U.S.dollar
dollardenominated
denominatedterm
termdeposit
depositrate
rate Agriculture CRM
12.0
12.0 Agriculture CRM
U.S.
U.S.dollar
dollardenominated
denominatedterm
termlending
lendingrate
rate Manufacturing
Manufacturing Wholesale
Wholesale&&retail
retail
11.0
11.0 Hotels
Hotelsand
andrestaurants
restaurants Other
Other Total Total
additional
10.0
10.0 budget of roughly US$400 million. The to further alleviate the negative impacts experienced
program
9.0
9.0
has benefited nearly 2.8 million people (16 by
3636 poor households and households at risk. The
percent
8.0
8.0
of the population) or 701,452 households. incidence
3131 of poverty under the national poverty line
Of these, 110,000 are children under five years of age; 26
was26 17.8 percent in 2019/20, but poverty is expected
7.0
7.0
387,000
6.0
are people over age 60; 60,000 are people to2121 have worsened in 2021 due to the economic
6.0 16
with disabilities, and 2,000 are people living with impacts
16 of the pandemic and associated lockdowns.
5.0
5.0 11
HIV/AIDS. As of September 2023, the COVID-19 Furthermore,
11 the energy and food price hikes in 2022
4.0
4.0 66
cash transfer program, which emerged as the largest due to the Russia-Ukraine conflict could exacerbate
3.0
3.0 11
component of the government’s fiscal intervention, the poverty level. However, poverty is anticipated to
Jan-19
Apr-19
Jul-19
Oct-19
Jan-20
Apr-20
Jul-20
Oct-20
Jan-21
Apr-21
Jul-21
Oct-21
Jan-22
Apr-22
Jul-22
Oct-22
Jan-23
Apr-23
Jul-23
Jan-19
Apr-19
Jul-19
Oct-19
Jan-20
Apr-20
Jul-20
Oct-20
Jan-21
Apr-21
Jul-21
Oct-21
Jan-22
Apr-22
Jul-22
Oct-22
Jan-23
Apr-23
Jul-23
-4-4

Jan-15
Jul-15
Jan-16
Jul-16
Jan-17
Jul-17
Jan-18
Jul-18
Jan-19
Jul-19
Jan-20
Jul-20
Jan-21
Jul-21
Jan-22
Jul-22
Jan-23
Jul-123
has disbursed US$1.2 billion since its launch in decline because of the projected economic recovery

Jan-15
Jul-15
Jan-16
Jul-16
Jan-17
Jul-17
Jan-18
Jul-18
Jan-19
Jul-19
Jan-20
Jul-20
Jan-21
Jul-21
Jan-22
Jul-22
Jan-23
Jul-123
June 2020. In December 2022, the government also and a decrease in inflation in 2023.
launched a new cash transfer program for households
at risk due to inflationary pressure and severe flooding.
The cash transfer program under the inflationary
pressure scheme was completed by July 2023 with
THE OVERALL FISCAL
Figure
the 21.
21. Central
disbursement
Figure government
Centralof domestic
US$44 million
government revenue
and benefited
domestic revenue 1.8 DEFICIT
Figure
Figure22. HAS
22. Central WIDENED
Centralgovernment
governmentexpenditure
expenditure
million peopleContribution
Contribution to
togrowth
growth
or 495,307 households. Contribution
Contributiontotogrowth
growth
(percentage
(percentagepoint)
point) (percentage
Thanks to the (percentage point)
easing ofpoint)
domestic revenue
Moreover, the Non-tax government
Non-tax (and
(andother) has doubled
other)revenues
revenues and 25 rising expenditure, the
25 fiscal
Capital
Capital deficit has
expenditures
expenditures
Taxes
Taxeson
oninternational
international trade
tradeprogram to
its conditional cash
Taxes
transfer widened. During the first eight Goods
Goods and
andServices
months of 2023,
Services
30
30 Taxeson
ongoods
goodsand
andservices
services Wages and Compensation
approximately US$380 Wages and Compensation
24.3
24.3 Direct revenuesfor each
Directrevenues 23.8
pregnant the gap between total19.9revenues
20
20 19.9 (including grants)
Expenditures
Domestic revenues 23.8 Expenditures
woman bearing one child up to age two with
Domestic revenues and expenditures under the general government
20
20 15
15
IDPoor cards from August 2023. This assistance operations is estimated to have reached 4.0 percent 12.7
12.7
program has also expanded its coverage to include of1010GDP, compared to 3.2 percent during the same
10
10 8.5 9.0
9.0
female workers who are members of the National period in 2022. 8.5 Revenue including grants is estimated
Social Security Fund, female civil servants, and intern to 5have
5 amounted to 15.0 percent of GDP, down
00 0.4
0.4
and contract government officials. -2.6 In October 2023,
-2.6 from 15.5 percent collected during the same period
00
the government announced the expansion of the in 2022, while expenditures rose to 19.0 percent of
-10
-10 -3.6
health equity fund,-11.7 which was originally restricted
-11.7 GDP,
-5-5 up from 18.5 percent of GDP. Government -3.6
to households with an equity card to households at deposits (fiscal reserves), which stood at 16.0 percent
-20
-20
risk,8-m
with access to free8-m health services. The increase of-10
-10GDP (riel 21.3 trillion) by August 2023, down
8-m2019
2019 8-m
8-m2020
2020 8-m2021 2021 8-m 8-m2022
2022 8-m 8-m2023
2023 8-m
8-m2019
2019 8-m
8-m2020 8-m
8-m2021
2021 8-m 8-m2022
2022 8-m 8-m2023
in cash aid and coverage expansion of programs serves from 17.8 percent at2020
the end of 2022. 2023

Figure
Figure 23.23.
Figure 23. General
General
General government
government
government operations
operations
operations Figure
Figure24.
Figure 24. GGeneral
eneralgovernment
24. General governmentsurplus/deficit
government surplus/deficitand
surplus/deficitand
and
(percent of GDP) (percent
(percentof
ofGDP)
GDP) financing financing
financing
(percent of GDP) (percent
(percentof
ofGDP)
GDP)
Total
Totalrevenue
revenue(and
(andgrants)
grants) Total
Totalexpenditure
expenditure 10.0
10.0 Foreign
Foreignfinancing
financing Debt
Debtamortization
amortization
Overall
Overallbalance
balance Domestic
Domesticfinancing
financing Financing
Financing
35
35 8.0
8.0
30
30
6.0
6.0
25
25
20 4.0
4.0
20
15
15 2.0
2.0
10
10 0.0
0.0
55
-2.0
-2.0
00
-5-5 -4.0
-4.0

-10
-10 -6.0
-6.0
2018
2018 2019
2019 2020
2020 2021
2021 2022
2022 2023p
2023p 2018
2018 2019
2019 2020
2020 2021
2021 2022
2022 2023p
2023p
Sources: Budget Settlement Laws; World Bank staff projections. Sources: Budget Settlement Laws; World Bank staff projections.
Note: p = projections. Note: p = projections.

Cambodia Economic Update November 2023 23


PUBLIC DEBT STOCK
REACHED 33.1 PERCENT
OF GDP
By mid-2023, Cambodia’s public debt-to-GDP
ratio reached 33.1 percent or US$10.7 billion
in outstanding debt, of which 99.5 percent
or US$10.6 billion is public external debt,
while public domestic debt accounted for the
remaining 0.5 percent or US$46.5 million.20 Of
the total US$10.6 billion public external debt, 64.3
percent and 35.6 percent is owed to bilateral creditors
and multilateral creditors, respectively, compared
to 67.5 percent and 32.4 percent, respectively in
2022. Triggered by the pandemic, Cambodia’s
debt accumulation picked up amid slow revenue
collection and rising demand for health and social
assistance spending, resulting in a widening financing
gap. To finance the gap, the country’s public debt,
which consists almost solely of external debt, rose by
5 percent of GDP, to 33.1 percent of GDP by mid-
2023, up from 28.2 percent of GDP in 2019. External
borrowing remained highly concessional, with a
weighted grant element of 44.7 percent in 2023. The
weighted average interest rate of contracted loans was
0.42 percent per year in the first half of 2023, down
from 1.18 percent during the same period in 2022,
while weighted average maturity was 21.22 years,
down from 22.55 years.
China continued to be Cambodia’s largest
official creditor. Total debt owed to China
reached US$4.01 billion. As a share of total
outstanding public external debt, Chinese
outstanding debt declined to 37.5 percent in mid-
2023, down from 40.1 percent in 2022, due to
rising multilateral debt. Cambodia’s second-largest
creditor is the Asian Development Bank, to which
it owed US$2.2 billion, or 20.8 percent of total
public external debt.
The World Bank has now become Cambodia’s
third-largest creditor, overtaking Japan, due to
accelerated disbursements, which quickly rose
from US$15.8 million a year in 2017 to US$268.9
million in 2022 (and US$338 million during the
first half of 2023) to meet rising demand for
financing priority sectors. A wide-ranging area
20 Ministry of Economy and Finance 2023a.
21 For detailed sectors and projects, see https://projects.worldbank.org/en/projects-operations/projects-list?lang=en&countrycode_exact=KH&os=0.
22 International Monetary Fund 2022a.
24
of the priority sectors financed by the World Bank
include policy development financing, general and
higher education, social and economic land allocation,
agricultural diversification, health equity and
quality improvement, road connectivity, livelihood
enhancement, water supply, disaster management,
and more.21 As of June 2023, total outstanding debt
owed to the World Bank accounted for US$1.3 billion
or 11.9 percent of total. Cambodia’s fourth- and fifth-
largest creditors are Japan and the Republic of Korea,
accounting for 10.6 percent and 4.9 percent of total
outstanding debt, respectively. Old debt accounted
for 5.9 percent of the total.
Since the pandemic hit in 2020, the authorities
have been filling the pandemic-induced widening
financing gap primarily with rising proceeds
from loan disbursements, supplemented by
drawdowns of government deposits (fiscal
reserves). Loan disbursements rose from US$829
million (2019) to US$1,213 million (2020), US$1,168
million (2021), and US$1,345 million (2022). Of the
total disbursement of US$913.7 million in the first
half of 2023, 53.0 percent financed the country’s
public infrastructure sector (transport, irrigation,
energy, water supply and others) and 47.0 percent
financed non-infrastructure priority sectors (health,
education, agriculture, and others), compared to 64.1
percent and 35.9 percent, respectively, in 2022. U.S.
dollar-denominated outstanding debt remained the
largest, rising to 46.0 percent of total debt stock in
mid-2023, up from 44.0 percent in 2022, followed
by Special Drawing Rights (SDR)-denominated
debt, at 20.0 percent. Although China is Cambodia’s
top creditor, the country’s public external debt
denominated in Chinese yuan accounted for only
12.0 percent of total debt stock. Public external
debt denominated in Japanese yen, euro, and other
currencies, accounted for 10 percent, 7 percent, and
5 percent, respectively.
The joint World Bank/International Monetary
Fund Debt Sustainability Analysis conducted in
2022 indicated that Cambodia remained at low
risk of external and overall debt distress under
the Low-Income Countries Debt Sustainability
Framework.22 The total public and publicly
guaranteed debt-to-GDP ratio is projected to rise by
around 4 percentage points during the next decade.
The present value of the external debt-to-GDP ratio
Cambodia Economic Update November 2023
breaches its threshold in the exports stress test, which
would imply a moderate risk rating. However, the
breaches are small, short-lived, and driven by the
exceptional volatility of exports in 2020 that has
increased the sample volatility for the standardized
shock. Moreover, other debt burden indicators are
projected to remain well below their thresholds under
the baseline and the shock scenarios.
Outlook
Cambodia’s real GDP growth is projected to
reach 5.4 percent in 2023, marginally lower than
5.5 percent projected in May 2023 (see table 2)
as domestic demand eased and external demand
slowdown continued. This year’s fiscal deficit is
expected to widen to 6.9 percent of GDP, up from
4.8 percent of GDP in 2022 (figure 23). To finance
the 6.9 percent of GDP overall fiscal deficit, external
financing, which includes project and budget support
(loan disbursement), is expected to account for 3.6
percent of GDP (or one-third) (figure 24), while the
remaining two-thirds is to be financed by a drawdown
of government deposits (fiscal reserves).
In the short term, the overlapping negative
shocks of the pandemic, Russia’s invasion of
Ukraine, and the sharp tightening of monetary
policy in major economies to contain high
inflation are expected to continue to affect the
economy. In this context, the economy is expected
to continue to grow at a slower pace than earlier
projected, expanding at 5.8 percent and 6.1 percent
in 2024 and 2025, respectively. Despite this year’s
improvement in approved property development
permit value, prospects of the real estate sector
continue to remain uncertain, given high debt and
tighter financing conditions. Although economic
growth is forecast to be lower than previously
expected, the pace of poverty reduction is projected
to accelerate, but it is highly unlikely to reach the pre-
pandemic level.
In the medium to longer term, real growth is
expected to trend back to potential, reaching 6
to 7 percent, driven by stronger exports and FDI
inflows facilitated by the newly ratified free trade
agreements, a substantial increase in private and
public investment in key physical infrastructure, and
structural reforms.
Cambodia Economic Update November 2023
Challenges and risks
The outlook is, however, subject to substantial
downside risks. Major downside risks pertain
to weaker-than-expected global demand further
constraining the country’s goods exports, tighter
global financial conditions affecting the highly
leveraged financial sector, and renewed oil and
food price shocks negatively impacting domestic
consumption. Domestically, rising household debt
and the continued concentration of domestic credit
in the real estate sector remain key risks to financial
stability. Cambodia’s gross external debt position
rose to 76.1 percent of GDP in 2022, up from 41.3
percent of GDP a decade ago, as the total external
debt that Cambodia owes to foreign creditors rose.
In addition, fiscal-monetary policy coordination in
Cambodia remains a challenge. While countercyclical
fiscal policy continued, tightening monetary policy
has already begun. A growth shock originating in the
region’s largest trading partners, China, and the U.S.
would impact economic performance in the EAP
countries including Cambodia through bilateral
trade and financial flows, including FDI.
Further tightening of global financial conditions,
especially surging global interest rates, could
worsen investment in the tradable sectors and
severely affect the highly leveraged banking
system. Global growth, especially global trade,
could be even weaker than anticipated, worsening
manufacturing exports, currently providing about 1
million jobs (18 percent of nonfarm employment)
in the event of widespread financial sector stress
or if more persistent inflation pressures prompt
tighter-than-expected monetary policy. Worsening
geopolitical tensions, conflict and social unrest, and
natural disasters stemming from climate change,
continue to present downside risks in many emerging
and developing economies, including Cambodia.
25
 Table 2. The macro outlook indicates continued economic recovery
2018 2019 2020 2021 2022 2023p 2024p 2025p
National Accounts and Prices
GDP at constant market prices
7.5 7.1 -3.1 3.0 5.2 5.4 5.8 6.1
(% change)
Agriculture 1.1 -0.5 0.6 1.2 0.7 1.4 1.4 1.4
Industry 11.6 11.3 -1.4 9.4 8.3 4.8 7.4 7.7
Services 6.8 6.2 -6.3 -2.7 3.5 8.0 6.1 6.3
Consumer Price Index 2.5 1.9 2.9 2.8 5.5 3.0 2.8 2.7
General Government (% of GDP)
Revenue and grants 23.8 27.0 23.8 22.0 23.2 21.4 22.7 22.9
Expenditure and net lending 23.4 25.5 28.8 29.2 28.0 28.3 27.5 26.1
Overall balance (including
0.4 1.5 -4.9 -7.2 -4.8 -6.9 -4.8 -3.2
grants)
Foreign financing 3.9 4.2 5.5 4.7 5.1 3.4 3.9 3.0
Net domestic financing (from
-3.6 -4.9 0.5 3.5 0.9 4.8 2.2 1.7
current savings)
Amortization -0.7 -0.8 -1.0 -1.1 -1.2 -1.3 -1.4 -1.4
Money and Credit
Broad money (% change) 26.6 18.2 15.3 20.0 8.2 10.7 13.0 15.1
Credit to the private sector (%
27.4 27.0 17.7 23.2 18.9 9.8 12.6 15.8
change)
External Sector (US$m unless otherwise)
Exports (goods and services) 15,076 16,351 16,692 18,565.9 24,494.7 29,149.5 35,679.0 45,186.1
Imports (goods and services) 15,494 18,198 19,243 28,120.6 38,177.8 34,971.4 38,856.1 46,761.5
Foreign Direct Investment, net
3,089 3,561 3,498 3,391 3,737 3,689 4,316 4,871
inflows
Gross official reserves 14,598 18,733 16,237 17,675.3 17,764.8 16,006.7 16,295.0 18,123.8
(months of imports) 6.3 9.7 10.4 8.1 7.0 6.0 5.5 5.0
Current account (percent of
-8.9 -15.2 -12.4 -42.6 -24.4 -13.4 -11.5 -9.6
GDP)
Exchange rate (riel per US$
4,067.0 4,070 4,077 4,100.0 4,150.0 4,110.0 4,100.0 4,090.0
average)
Total public debt (% of GDP) 28.3 28.1 36.1 36.3 36.7 36.8 36.5 36.4

Memorandum items:
Nominal GDP, USD million 24,476 27,030 25,970 26,953 29,602 32,413 35,321 38,589

Sources: Cambodian authorities; World Bank staff estimates and projections.

Note: p = projections.

26 Cambodia Economic Update November 2023

Policy options
An acceleration of key structural reforms
envisaged under the 2023–28 Pentagonal
Strategy is needed to boost economic activity. As
discussed in the Special Focus section, Cambodia’s
strong economic growth over the past decade
was largely driven by factor accumulation, with
limited contributions from productivity. Structural
transformation has slowed since 2016, and recent
years have seen only modest improvements in
the economy’s international competitiveness. To
avoid a future slowdown in economic growth and
poverty reduction, Cambodia needs to transition
to a more sustainable pattern of growth through
further structural reform. In particular, lifting the
contributions to growth from productivity and
human capital will require reforms to the business
environment and larger, higher quality investments
in infrastructure and in education and skills.
Further improvements to the business
environment are critical for boosting the
productivity and competitiveness of Cambodian
firms. The cost of doing business remains
relatively high in Cambodia, reducing international
competitiveness and inhibiting innovation and shifts
into higher value-added activities. To help support
increased private sector investment, Cambodia needs
to strengthen the predictability of the regulatory
environment and expand SME access to finance.
Further efforts to streamline complex and restrictive
business entry requirements (including minimum
capital requirements), together with improvements to
the functioning of the insolvency framework, would
help reduce costs of firm entry and exit. Simplifying
and digitalizing business services, especially the
issuance of licenses and permits, would reduce the
associated costs. An important starting point is to
establish a complete inventory of operating licenses
and permits, and then to implement full automation,
transparency, and a risk-based approach to licensing.
More competition would foster cost reductions and
innovation and promote productivity growth by
shifting market share toward more efficient producers
and incentivizing firms to become more efficient.
To support the tourism sector, a reduction of costs
and fees (visa, accommodation, food, transport, and
entrance fees) – including elimination of unofficial
fees – would help attract international arrivals.
23 World Bank 2011.
24 See World Bank (2022) for more details.
Cambodia Economic Update November 2023
Regular consultations through the government-
private sector working groups and public-private
sector forums will help on all these fronts.
Upgrading Cambodia’s infrastructure is also
an important foundation for productivity
and international competitiveness. Cambodia
continues to have a large infrastructure financing gap,
resulting in inadequate infrastructure services that are
struggling to keep up with rapidly growing demand.
Large investments are needed in the energy sector to
address the dual challenge of meeting rapid growth
in electricity demand while meeting the country’s
climate change commitments. Investments are also
needed in upgrading basic urban services such as
piped water, sanitation, solid waste management,
telecommunications, and transport, as well as
strengthened urban planning to ensure its cities
develop in an inclusive, efficient, and environmentally
sustainable manner.
Moreover, gaps in domestic and regional
transport connectivity impact the efficiency
and resilience of supply chains and raise the
cost of trade. Investments are needed to address
specific infrastructure gaps in regional connectivity:
to improve the East-West corridor across Thailand,
Cambodia, and Vietnam (and the only road corridor
connecting Cambodia with Lao PDR); to improve
the inland waterway connection with Vietnam;
and to improve the existing railway operations
and infrastructure links with Thailand. It is also
important to improve trade facilitation and logistics
performance. Further efforts must be made to reduce
transport and logistics costs by monitoring the
efficiency of main trade gateways such as ports and
border checkpoints. In many countries with high
logistics costs, such as Cambodia, the unreliability of
the supply chain is the most important contributor
to those costs. Studies have found that it takes three
times as many days, nearly twice as many documents,
and six times as many signatures to import goods
in developing countries than it does in developed
countries.23 The risk of corruption may be mitigated
by promoting full automation and transparency
in customs clearance and smart logistics (applying
artificial intelligence, automation, the industrial
internet of things technologies), while regularly
collecting reports on irregularities from traders and
logistics service providers.24
27
 Raising learning outcomes is crucial to address
skills shortages, develop a “future-ready”
workforce, and drive Cambodia’s future
productivity growth. Firms are reporting growing
skills shortages, and labor productivity growth has
declined sharply over the past five years. Few young
Cambodian children are being enrolled in early
childhood education, which is undermining early
development and hindering mothers from returning
to work. Primary schools are experiencing a decline
in learning outcomes despite improved access. Few
students are progressing to secondary school and
those that do are often inadequately prepared and
experience high dropout rates. Options for post-
secondary learning are limited and are of low quality.
Finally, the dynamism of the labor market is limited
by insufficient supply and demand information.
In addition to these structural reforms to
promote sustainable growth, maintaining
macro-fiscal stability continues to be a priority.
It is critically important to ensure coordination of
fiscal and monetary policies. More efforts are needed
to restore fiscal space, including through tax reform:
• Increasingly generous tax holidays and exemptions,
which often fail to attract investment, increase
the tax system’s complexity, and curtail the tax
base, should be reviewed. While indirect taxes
such as the value-added tax and excises continue
to provide a big chunk of domestic revenue,
reforming the corporate income tax to broaden
the tax base and strengthen compliance is a must.
The introduction of a progressive personal income
tax should be a longer-term objective.
• Reform is also needed to simplify and reduce the
costs of tax administration. Tax and customs
administration systems can be modernized, while
improving system interoperability. The main goal
is to make it easier to pay taxes and duties by fully
implementing measures such as electronic tax filing
and customs clearance systems: technology can
both improve efficiency and reduce opportunities
for corruption.
It is also critical to safeguard financial stability,
given Cambodia’s highly leveraged banking
sector. The recent credit boom has resulted in
relatively high levels of private sector debt which
is concentrated in real-estate related exposures. To
safeguard financial stability:
25 International Monetary Fund 2022c.
26 World Bank 2020.
28
• The immediate focus should be on intensified
bank supervision: stress testing of individual
institutions, systematic onsite inspections, further
alignment of the regulatory framework with
international standards, and thorough assessments
of the quality of loan portfolios, among others. To
prepare for increasing levels of nonperforming
loans, it is crucial to ensure that resolution options
are now ready to be deployed as needed, and to
strengthen the country’s insolvency regime.
• In the short term, efforts to prepare legislation
on deposit insurance and bank resolution must
continue. Given concerns around shadow banking
activities, such as credit issued by construction or
real estate developers to buyers of residential real
estate, it will be of critical importance to collect the
data necessary to monitor and assess the legality of
these activities.
• In the longer term, it is important to regain the
country’s monetary policy by gradually promoting
the use of local currency – with an introduction of
a clear and reliable roadmap for de-dollarization.25
Finally, improving public sector performance is
necessary to create an institutional environment
which supports rather than hinders the
development of the private sector. The authorities
recognize the link between the quality of governing
institutions and economic growth, and place
reform and modernization of public institutions
at the core of the Pentagonal Strategy. Key public
administration reforms include: (i) strengthening
the quality and effectiveness of public service
delivery, including the development of organizational
performance indicators and a system for regular
high-level reporting and monitoring of performance;
(ii) optimizing organizational structures and
reforming back-office and support functions across
government; and (iii) strengthening the meritocratic
approach to civil service employment, and reforming
pay and compensation, including by linking worker
performance with pay increases. Determining public
sector wage policy must be an integral part of overall
civil service reform and should be done within a
consistent medium term fiscal framework to ensure
affordability.26
Cambodia Economic Update November 2023
 Photo: paul-szewczyk @unsplash
PART 2.
SPECIAL FOCUS
ACCELERATING STRUCTURAL
REFORMS TO BOOST
PRODUCTIVITY AND
COMPETITIVENESS27
27 This Special Focus was written by Faya Hayati.

INTRODUCTION
This special focus section of the Cambodia
Economic Update reflects on the country’s
development over the past decade and explores
the structural reforms needed to boost
productivity and competitiveness over the next
five years. It is based on recent work by the World
Bank conducted as part of its forthcoming report,
Cambodia Systemic Country Diagnostic Update.
Cambodia’s economic growth was impressive
over the past decade and supported rapid poverty
reduction. Prior to the onset of the COVID-19
pandemic, Cambodia’s economic growth averaged
around 7 percent over much of the past ten years
(figure S.1, panel A), ranking its growth rate as the
11th fastest in the world and the fifth among middle-
income countries during that period. Moreover,
Cambodia’s growth model continued to deliver
sustained and broad-based progress toward ending
extreme poverty, with the poverty rate falling by
about half from 33.8 percent in 2019 to 17.8 percent
in 2019/20. The COVID-19 pandemic triggered
the first economic contraction in 25 years and a rise
in poverty in 2020 (figure S.1., panel B), however,
the economy has since rebounded and is forecast to
return to robust growth over the next five years.
Figure S.1. Overview of economic growth and poverty reduction over the past decade
Figure 1: Growth and poverty reduction over the past decade
Panel A
Real GDP growth
Percent (period average)
7.1% 7.2%
1.6%
2012-16 2017-19 2020-22
(pre-COVID) (COVID)
Sources: World Bank 2023e and Cambodia Socio-Economic Surveys 2009, 2014 and 2019/20.
Figure 2: Contributions to growth over the past decade
Contributions to growth, by sector
Share of total growth (period average)
30
Statistical 5% 7% 12%
discrepancy 4% 1%
6%
Agriculture
However, Cambodia’s strong economic growth
was largely driven by factor accumulation,
with limited contributions from productivity,
which is not sustainable over the long term.
Recent growth was largely driven by high levels of
investment (capital accumulation) and growing
numbers of Cambodians entering the workforce
(labor accumulation). There were, however, limited
contributions to growth from labor productivity
(labor quality) and total factor productivity (TFP).
There were also modest improvements in the
economy’s international competitiveness. To avoid
a future slowdown in economic growth and poverty
reduction, Cambodia needs to transition to a more
sustainable pattern of growth. This transition will
require further structural reform over the next
five years to better enable productivity growth
and competitiveness. Lifting the contributions to
growth from TFP and human capital will require
reforms to the business environment and larger,
quality investments in infrastructure as well as
education and skills.
Panel B
Poverty rate
Percent of population
33.8% -22%
26.3% -32%
17.8%
2009 2014 2019/20
Contributions to growth, by source
Share of total growth (period average)
Cambodia Economic Update November 2023
20% 8%
 TFP declining. However, this progress was derailed by
THERE HAVE BEEN the onset of the COVID-19 pandemic, with growth
LIMITED CONTRIBUTIONS becoming even more dependent on physical capital
accumulation. TFP again became a major drag on
TO ECONOMIC GROWTH growth, despite Cambodia’s high inflows of foreign
FROM PRODUCTIVITY direct investment (FDI), which has traditionally
supported technology transfer. Low TFP is in part
AND ONLY MODEST due to most investment going into low-productivity
IMPROVEMENTS
Figure
Figure1:1:Growth
Growthand andpoverty
IN
povertyreduction
reductionover
overthe
thepast
past
sectors such as real estate and construction. In
decade
decade there continued to be small and declining
addition,
INTERNATIONAL
Real
Real
GDPGDPgrowth
growth contributions
Poverty
Povertyrate
rate from human capital accumulation
COMPETITIVENESS
Percent
Percent
(period
(period
average)
average) (labor
Percent
Percentquality)
of of
populationboth pre- and post-pandemic (figure
population

7.2%
7.2%
S.2, panel B), which is linked to limited progress on
7.1%
7.1%
There have been limited contributions to building human-22%
33.8%
33.8% capital
-22% and skills.
economic growth from productivity over the
past decade, which increases the risk of a future Moreover, Cambodia’s broad structural shift
-32%
-32%
slowdown in growth. Over the past ten years, from employment in26.3% 26.3%
agriculture to industry
Cambodia’s growth model has largely depended on and services stalled in the second half of the past
factor (especially capital) accumulation (Figure S.2, decade, also increasing risks to future growth.
17.8%
17.8%
panel A), with low contributions from labor quality Between 2012-2016, a major shift of workers from
and total factor productivity.28 Previous analysis has lower-productivity agriculture to higher-productivity
traced this poor productivity performance
1.6%to: (1) low
1.6%
industry and services was a big driver of economic
human capital; (2) resource misallocation stemming and productivity growth in Cambodia. Agriculture’s
from a lack of competition and market signals; and (3) share of employment dropped by 20 percentage points
low within-firm productivity growth stemming from from 56 percent in 2011 to 36 percent in 2016 (figure
2012-16
2012-16
a disabling business
2017-19
2017-19 2020-22
environment. This
2020-22
growth model S.3, panel
2009A). This large
2009 2014intersectoral 2019/20
2014 reallocation
2019/20
(pre-COVID)
(pre-COVID) (COVID)
(COVID)
was showing some signs of improvement between of labor also helped compensate for sub-optimal
2017 and 2019, with the negative contribution from productivity growth within the manufacturing and
service sectors.29 Between 2017-19, growth remained

Figure2:S.2.
Figure Contributions
2:Contributions
Contributions togrowth
toto economic growth
growthover
overthe over
thepast the past decade
pastdecade
decade
Panel A Panel B
Contributions
Contributions toto growth,
growth, byby sector
sector Contributions
Contributions toto growth,
growth, byby source
source
Share
Share of of total
total growth
growth (period
(period average)
average) Share
Share of of total
total growth
growth (period
(period average)
average)

Statistical
Statistical 5%5% 7%7% 12%
12% 20% 8%8%
20%
discrepancy
discrepancy 4%4% 1%1%
6%6%
Agriculture
Agriculture
956
956 Labor
Labor
39%
39%
Services
Services 47%
47% quality
quality 324%
324%
Labor
Labor 19% 5%5%
19%
15%
15%
quantity
quantity
104%
104% 9090
Other
Other Capital
Capital
industry
industry 33%
33% -28%
-28% -5%
0%0% -5%
24%
24% TFP
TFP
(including
(including 61%
61%
construction)
construction)
-251%
-251%
Manufacturing
Manufacturing 20%
20% 19%
19%
-3%
-3%
2012-16
2012-16 2017-19
2017-19 2020-22
2020-22 2012-16
2012-16 2017-19
2017-19 2020-22
2020-22
(pre-COVID)
(pre-COVID) (COVID)
(COVID) (pre-COVID)
(pre-COVID) (COVID)
(COVID)

Sources: World Bank staff calculations using data from and Total Economy Database (TED); The Conference Board (2022);
and World Development Indicators (WDI) 2021.
Figure
Figure3:3:Structural
Structuralchanges
changesininthe
theCambodian
Cambodianeconomy
economy
28 World Bank 2021.
GDP
GDP
29 by by
sector
sector
Resilient Workers
Workers
Development: A Strategy to Diversify Cambodia’s by by
sector
sector
Growth Labor
Labor
Model; Cambodia Country Economic productivity
productivity(World Bank, 2021).
Memorandum
Share
Share
of of
total,
total,
Percent
Percent Share
Share
of of
total
total
employment,
employment,Percent
Percent Output
Output
perper
worker,
worker,
2021
2021
PPP
PPP
$ $
Statistical
Statistical 6%6% 6%6% 6%6%
Thailand
Thailand 35.683
35.683
discrepancy
discrepancy
Cambodia Economic Update November
25%25% 23% 2023
23% 36%
36% 36%
36% 23.886
23.886
31
Guatemala
Guatemala
Agriculture
Agriculture 35%
35%
Agriculture56%
Agriculture 56%
Philippines
Philippines 23.728
23.728
 26.3% -32%

17.8%

strong despite little evidence of further structural outcomes), a shift to higher value added activities
1.6%
transformation at the sectoral level. The agriculture in manufacturing (requires better human capital,
sector, for example, shed almost no labor after 2016, improved business environment), and perhaps
a trend that is largely consistent both pre- and post- a cooling of private construction activity which
pandemic.
2012-16The lack of2017-19labor shedding 2020-22
in agriculture, carries risks
2009 (coupled with 2014a shift toward public
2019/20
combined with the growth of the construction
(pre-COVID) (COVID) sector, infrastructure).
means fewer workers shifting into higher-productivity
sectors such as manufacturing and services (figure S.3, Cambodia also made only modest progress
panel B). These trends – combined with ongoing sub- on improving its international economic
optimal productivity growth within manufacturing competitiveness over the past decade, and
Figure
and 2: Contributions
services – led to a sharp toslowdown
growth over off a low base. Cambodia improved its global
the past decade
in aggregate
labor productivity growth over the past five years ranking on the global competitiveness index by
Contributions to growth, by sector
from an average of 5.5 percent per year between four positions tosince
Contributions 2009
growth, (figure S.4, panel A). The
by source
Share of total growth (period average)
2011 and 2016 to 2.4 percent between 2016 and modest improvement
Share of total in competitiveness reflects
growth (period average)

2021. mixed progress at the sub-index level, with big relative

StatisticalCambodia’s 5%aggregate 7% labor productivity
12% 20% 8%
level remains the
discrepancy 4% lowest among 1% its structural peers, improvements on macroeconomic and technological
6%
well behind Myanmar and Bangladesh and about
Agriculture indicators, but big relative declines business and
a third of Vietnam’s, with 39% limited convergence
956 product
Labor market dynamism as well as on institutions.
Services 47% quality Cambodia’s competitiveness ranking
Overall, 324% of
(figure S.3, panel C). Between 2020-22, the sharp Labor 19% 5%
slowdown in growth was associated with a collapse 106th in the world remains15%very low, especially
quantity
in services and especially tourism due to COVID-19 compared
Capital
to 104%
its neighbors 90Thailand (40th), the
Other
related
industryshutdowns. This slowdown 33% was partly offset, Philippines
TFP
(64th)
-28% and Vietnam 0% -5% (67th). Cambodia’s
24% 61%
(including
however, by the resilience of the export-orientated competitiveness is being held back particularly by a
construction)
manufacturing sector. In 2023, services has come lack of business dynamism (127th in the world),
-251% the
Manufacturing 20% 19%
back with the recovery of tourism, but sustainable quality of institutions (123rd), a lack of skills (120th),
medium- and long-term growth will require a -3% product market competitiveness (113th) and poor
resumption of the structural2017-19
2012-16 transformation out of
2020-22
infrastructure 2012-16
(106th). 2017-19 2020-22
(pre-COVID) (COVID) (pre-COVID) (COVID)
agriculture (supported by improved human capital

Figure S.3. Structural changes in the Cambodian economy

Figure
Panel A 3: Structural changes in the Cambodian
Panel B economy Panel C
GDP by sector Workers by sector Labor productivity
Share of total, Percent Share of total employment, Percent Output per worker, 2021 PPP $
Statistical 6% 6% 6%
Thailand 35.683
discrepancy
25% 23% 36% 36% Guatemala 23.886
Agriculture 35%
Agriculture 56%
Philippines 23.728

Vietnam 21.512
34%
40%
37% 37% Bangladesh 17.086
Services 38%

27% Myanmar 10.935

Other Services
18%
industry 13% Cambodia
7% 7.757
(including (2021)
27% 27% +2.4% p.a.
construction) 18% Cambodia
15% 16% Industry 17% 6.902
Manufacturing (2016)
+5.6% p.a.
2011 2016 2021 2011 2016 2021 Cambodia 5.503
(2011)

Sources: World Development Indicators (WDI); Cambodia Socio-Economic Survey (CSES) 2021; Total Economy Database (TED); and The Conference
Board (2022).
Note: p.a. = per annum.

32 Cambodia Economic Update November 2023

Figure
FigureS.4.
4: Progress
Progress on global
competitiveness
competitiveness over the past decade
Panel A Panel B
WEF global competitiveness ranking WEF sub-index rankings for Cambodia
Change in ranking between 2009 and 2019; 2019 ranking Change in ranking between 2009 and 2019; 2019 ranking

Market size 48 84
Philippines 23 64
Macroeconomic stability 47 75
Vietnam 8 67 ICT adoption 42 71
Financial system 6 88
Nicaragua 6 109
Innovation capability 5 102
Cambodia 4 106 Skills 2 120
Figure 4: Progress on competitiveness Health 2 105
Bangladesh 1 105
Infrastructure -11 106
WEF global
Myanmar 1 competitiveness ranking 131 WEF sub-index
Labor market rankings for Cambodia
-13 65
Change in ranking between 2009 and 2019; 2019 ranking Change in ranking between 2009 and 2019; 2019 ranking
Business dynamism -26 127
Thailand -4 40 Market size 48 84
Philippines 23 64 Product market -28 113
Macroeconomic stability 47 75
Guatemala -18 Institutions -31 123
Vietnam 8 98
67 ICT adoption 42 71
FinancialGlobal
Source: World Bank staff calculations using data from a series of the World Economic Forum’s 6
systemCompetitiveness Index reports 88
Nicaragua 6 109
Innovation capability 5 102
Cambodia 4 106 Skills 2 120
Figure 5: Progress on reducing firm costs Health 2 105
The recent pandemic helped accelerate some
DESPITE
Bangladesh
RECENT 1 105
Infrastructure -11
important structural reforms that led to
106

PROGRESS,
Cost of starting a business byTHE
Myanmar 1
country BUSINESS
(2019, unless otherwise specified);
131
Cost of logistics by country Labor market
reductions in firm
(2020, unless otherwise specified);
Business dynamism
-13
Costcosts,
of electricity
by country
-26
butto industrial
costs remain 65
users
(2020, unless otherwise specified);
127
high compared to Cents structural
per kW hourpeers and other
ENVIRONMENT
Share of income per capita (Percent)
Thailand -4 FORShare of GDP
40 (percent)
Product market -28
countries in East Asia. The COVID-19 pandemic 113

FIRMS
Guatemala
Nicaragua IN CAMBODIA
-18 65% Cambodia 98(2015)
Institutions
increased 33%
-31 supporting businesses123
the urgencyCambodia
of (2017) 0.167and
digitalizing government-to-business procedures,
REMAINS
Cambodia (2019) CHALLENGING 53%
Cambodia (2020) which 26% helped
-20%accelerate efforts to reduce the cost of
Phillipines 0.166

Cambodia (2022) 22% -58%

Cambodia (2022) 0.137 -18%
Indonesia 22%
Phillipines 22%
FigureS.5.
Figure 5: Progress onreducing
Progress on reducingfirm
firmcosts
costs Lao PDR 0.110
Panel A
Guatemala 18% VietnamB
Panel 20% Panel C
Thailand 0.091
Cost of starting a business Cost of logistics by country Cost of electricity to industrial users
Myanmar 15% by country Thailand 14%
(2019, unless otherwise specified); (2020, unless otherwise specified); by country (2020, unless otherwise specified);
Share of GDP (percent) Singapore
Cents per kW hour 0.086
Share of income per capita
Bangledesh 9% (Percent)
Malaysia 13%
Malaysia 0.078
Vietnam
Nicaragua 5% 65% Cambodia (2017) 0.167
Cambodia (2015) 33%
Singapore 9% Vietnam 0.068
Thailand
Cambodia (2019) 4% 53% Phillipines 0.166
Cambodia (2020) 26% -20%
Cambodia (2022) 22% -58%
Cambodia (2022) 0.137 -18%
Indonesia 22%
Phillipines 22%
Figure 6: Private sector perceptions Figure 7: Provision
Laoof government online
PDR 0.110 services
(percent
Guatemala of all firms surveyed)
18% Vietnam 20%
(index)
Thailand 0.091
Private sector perceptions
Myanmar 15% Provision of government online services
Thailand 14%
Percent of all firms surveyed, 2021 Index, 2022 Singapore 0.086
Bangledesh 9%
Obstacles to Doing Business Malaysia 13%
0.9 Malaysia 0.078
Vietnam 5%
What have been the main obstacles your company has 0.8
Singapore 9% Vietnam 0.068
Thailand encountered
4%during the past 12 months in Cambodia? 0.7
Non-transparent practices
& unofficial fees 0.6
Sources: Doing Business
Unfair 2020. For the Cambodia 2022 measure, staff calculations based on government-reported fees. Ly and Rastogi 2022, NESDC 2021;
competition 0.5
and Banomyong and Varadejsatitwong,
Taxation forthcoming.
Note: kW
Figure =
Availability Kilowatt.
6: Private sector perceptions
of human resources 0.4
Figure 7: Provision of government online services
Bureaucratic procedures
(percent of all firms surveyed) 0.3
(index)
Customs procedures
Electricity cost 0.2
Private sector perceptions
Availability of legal information
Non-transparent practices Provision of government online services
remain an obstacle, but 0.1 2022
Percent of all firms surveyed, 2021 Index,
Cambodia EconomicLogistics Update November 2023 slight improvements were 33
Infrastructure seen in taxation, and 0
reducing unfair competition.
Cost of human resourcesObstacles to Doing Business 0.9
a
ala

ar
a
d

es
sh

di
m

gu
an

Access to finance
m
in
de

tem

bo
na

ra

0.8
n
ail

ip
gle

What have been the main obstacles your company has

ya
et

am
ica
ill
Th

ua
Vi

M
an

0% 10% 20% 30% 40% 50% 60% 70%

Ph

C
G
 Figure
Figure6:6:Private
Privatesector
sectorperceptions
perceptions Figure
Figure7:7:Provision
Provisionofofgovernment
governmentonline
onlineservices
services
(percent
(percentofofall
allfirms
firmssurveyed)
surveyed) (index)
(index)
Figure
Private S.6.
PrivatesectorPrivate
sector sector perceptions
perceptions
perceptions Figure S.7.
Provision
Provision Provisiononline
ofofgovernment
government of government
online
services
services online services
Percent
Percentofofallallfirms
firmssurveyed,
surveyed,2021
2021 Index,
Index,2022
2022
(percent of all firms surveyed) (index)
Obstacles
ObstaclestotoDoing
DoingBusiness
Business 0.9
0.9

What
Whathave
havebeen
beenthe
themain
mainobstacles
obstaclesyour
yourcompany
companyhas
has 0.8
0.8
encountered
encounteredduring
duringthe
thepast
past1212months
monthsininCambodia?
Cambodia? 0.7
0.7
Non-transparent
Non-transparent practices
practices
&& unofficial
unofficialfees
fees 0.6
0.6
Unfair
Unfair competition
competition 0.5
0.5
Taxation
Taxation
Availability
Availabilityofof
human
human resources
resources 0.4
0.4
Bureaucratic
Bureaucratic procedures
procedures
0.3
0.3
Customs
Customs procedures
procedures
Electricity
Electricitycost
cost 0.2
0.2
Non-transparent
Non-transparent practices
practices
Availability
Availabilityofof
legal
legal
information
information remain
remainanan
obstacle,
obstacle,
but
but
Logistics
Logistics
0.1
0.1
slight
slight
improvements
improvements were
were
Infrastructure
Infrastructure seen
seen
inin
taxation,
taxation,
and
and 00
reducing
reducingunfair
unfair
competition.
competition.
Cost
Costofof
human
human resources
resources

dia
a
mala
ala

arr
gua
a
Ba landd

G ness
eh
Vi sh

bodi

nma
am
Ph m

ragu
ip ne
ailan

ledes
Access
Access toto
finance
finance

yanm
tem

o
etnna

illipi
i
ngled

icara

amb
Thai

uate

Mya
Viet

Cam
Nica
Phill
Th

Bang

Gua

M
0%0% 10%
10%20%
20% 30%
30%40%
40% 50%
50% 60%
60%70%
70%

C
Source: EuroCham Cambodia Business Confidence Survey 2021. Source: UN E-Government Development Index 2022.

firm establishment and operation (figure S.5, panel
A). For example, Cambodia’s business registration
process was significantly simplified and almost fully
digitalized in 2020 through a single, integrated online
portal, enhanced in speed (down to eight days) and
costs (reduced by nearly 60 percent). In addition,
logistics costs fell by 20 percent between 2015
and 2020 (figure S.5, panel B), supported by the
establishment of a National Single Window and
National Logistics Council, and by the abolishment
of several state agencies that had regulated (and
increased the complexity of) cross-border trade (for
example, the Cambodia Import-Export Inspection
and Fraud Repression Directorate-General
(Camcontrol) and the Cambodian Shipping Agency
[Kamsab]). Finally, electricity prices for industrial
users fell by 18 percent between 2017 and 2022
following the implementation of tariff reforms.
Despite these improvements, many firm costs
remain relatively high compared to peers,
suggesting room for further improvement. The
cost of starting a business remains the highest among
all structural peers except Nicaragua, and more than
four times higher than in neighboring Vietnam and
Thailand (figure S.5, panel A). Transport and logistics
constraints are increasing the costs of domestic and
cross-border trade, creating inefficiencies in supply
chains, and reducing Cambodia’s international
competitiveness. National logistics costs in
Cambodia are estimated at 26 percent of GDP
(2020) which is higher than most ASEAN countries
including Thailand (14 percent) and Vietnam (20
percent). Transportation costs are particularly high,
representing more than 40 percent of total logistics
costs (alongside warehousing), pointing to significant
inefficiencies in the transport sector. Finally,
Cambodia still has one of the highest electricity tariffs
in the region for industrial users.
Compliance with licensing requirements also
remains a significant burden for businesses,
made more difficult by a lack of digitalization.
According to the private sector, Cambodian
businesses face an unusually large amount of red
tape from business licensing regulations and there is
a perception that regulation has increased after the
pandemic (figure S.6). Although the government
has attempted to make licensing requirements
more transparent,30 there is no complete inventory
of licenses and permits and no unified approach
toward risk-based regulations. Digital government-
to-business services (including license issuance) are
sporadic and lack interoperability. Cambodia ranks
127th in the world on the 2022 United Nations
E-Government Development Index, well below
regional and world averages. The “provision of online
services” score is the lowest of the areas measured by
the index (figure S.7).
The broader enabling environment in Cambodia
is also not conducive to firm productivity and
competitiveness. First, corruption and challenges
to the rule of law increase the costs and uncertainties
of doing business. Cambodia ranks 150th out of

30 An informational website www.business.gov.kh lists licensing requirement for more than 400 business activities mainly related to the Ministry of
Industry, Science, Technology and Innovation, Ministry of Tourism and Ministry of Posts and Telecommunication.

34 Cambodia Economic Update November 2023

Figure S.8.
8: Progress
Progresson
onboosting investmentin,inand
boosting investment infrastructure
provision of, infrastructure
Panel A Panel B Panel C
Gross capital formation Telecommunication Infrastructure Cambodia’s Road Network
(% of GDP, period average) Index, 2022 Pavement rate (Percent)
(2017-21, unless otherwise specified) 2022 2017

Vietnam 32% National 100%

Thailand 0.75
(1-digit) 100%
Myanmar 32%
Vietnam 0.70 73%
Bangledesh 31% National
(2-digit) 70%
Thailand 25%
Indonesia 0.65
Cambodia 38%
24% Provincial
(2017-21) 30%
Cambodia
0.56
Phillipines 24% (2022)
10%
Rural
Nicaragua 23% 5%
Loa PDR 0.30
Cambodia
21% +15% 22% +29%
(2012-16)
Cambodia 0.25 Total
+125% 17%
Guatemala 14% (2016)

Sources: World Bank staff estimates based on data from WDI (2021); MPWT and MRD (2023); and UN DESA (2022).

180 countries
Figure on perceptions
9: Relative performance of on
corruption,
the Human
31
and cents onIndex
Development the dollar
(HDI)in Cambodia, compared to 35.5
the judicial system is relatively weak and enforcing in the East Asia Pacific region on average, and 70.2
commercial contracts takes a long time and is costly.32 in Organisation for Economic Co-operation and
Human Development Index (HDI) ranking Human Development Index (HDI) metrics for Cambodia
Second, the private sector is characterized
Change in score between 2010 and 2021; 2021 ranking by a high Development
Change in score [OECD]
between 2010countries).
and 2021; 2021 score
degree of informality, which is a problem as the
informal economy tends to employ lower-skilled
Bangladesh 20% 129and
Gross national income
57% 4079
less productive workers, and the average informal
Myanmar 15%
firm in emerging market and developing economies is
149 SIMILARLY,
(GNI) per capita

only one-quarter as productive

Cambodia 10% as the average formal146 DESPITE
Mean years of
RECENT
firm. Third, anticompetitive practices have the
33 24% 5.1
Nicaragua 9%
potential to distort the allocation of resources and 126 PROGRESS,
schooling (years)
MAJOR
raise domestic prices above
Thailand 9%
efficient levels. The 66
last INFRASTRUCTURE GAPS
Global Competitiveness Report published ranked Expected years of
Cambodia 107th out6%of 141 countries for national
Vietnam 115
PERSIST
schooling (years)
7% 11.5

competition (including 100 out of 141 on domestic There were some positive developments
Philippines
competition and 4% 118th on competition in services, 116
onLifeincreasing
expectancy investment in, and provision
3% 69.6
which
Guatemala is significantly
4% lower than ASEAN peers135such of,
(years) at birth
infrastructure over the past five years.
as Thailand and Vietnam.34 Fourth, the Insolvency The government made significant progress on
Law provides a solid foundation in Cambodia but modernizing laws aimed at boosting public and
the regulatory framework remains incomplete, and private investment in infrastructure over the past
there is a lack of stakeholder awareness, preventing five years, including, for example, approving a new
Figure 10A: Progress on access to education and learning outcomes
the full benefits of the insolvency regime from being Public-Private Partnership (PPP Law in 2021) and
realized
Net in practice.
enrollment by schoolIn theinlast
level 15 years, only
Cambodia; Net aprimary
handful enrollment taking
rate steps to develop LowerCambodia’s capital markets.
secondary completion rate
of high-profile
Percent of populationinsolvency cases have been (%,handled by available)
2020 or latest (%, 2020 or latest available)
These reforms contributed to increased investment
Cambodian municipal courts, and all cases processed
100 levels, with gross fixed capital formation rising from
have
90 led to a low recovery90 Primaryrate for creditors
Vietnam (14.6
around 21 to 99% Vietnam
24 percent of GDP (figure S.8, panel98% A)
+10%
80 82
Thailand 98% Bangladesh 88%
31 Corruption Perception Index 2022, Transparency International; https://www.transparency.org/en/cpi/2022/index/khm
70
32 In the last Doing Business 2020 report, Cambodia ranked 182nd out of 190 countries in enforcing contracts.
Philippines 97% Thailand 85%
60 This is only in part explained by informal characteristics such as their younger age, less experience, and smaller size. Moreover, firms in the formal sector
33
50 that face informal competition are,
Lower
on average, only three-quarters as productive as those that do not (see Yu and Ohnsorge (2019),.
Nicaragua 96% Philippines 83%
47
34 World Economic Forum 2019; https://www3.weforum.org/docs/WEF_TheGlobalCompetitivenessReport2019.pdf
secondary
40 +52%
31 Upper Bangladesh 95% Nicaragua 66%
30 30
secondary
+77%
20
Cambodia
17
Economic Update November 2023 Guatemala 89% Cambodia 58% 35
10
Cambodia 89% Guatemala 56%
0
 and helped fund more investment in infrastructure
(figure S.8, panel B). For example, progress has been
made in improving the country’s main national
road corridors. Cambodia also made significant
progress in improving its telecommunications
infrastructure between 2016 and 2022 (but still lags
most ASEAN peers). In addition, electrification rates
have increased rapidly and Electricite du Cambodge
(EDC) has continued to improve the reliability and
efficiency of electricity services. Finally, there has
been improvements in access to water supply and
sanitation with, for example, access to piped water
in cities increasing from 69 percent to 80 percent
between 2015 and 2020.
However, the infrastructure investment gap in
Cambodia remains large. Public investment in
infrastructure accounted for only 3.2 percent of GDP
during 2019-22, while estimated annual investment
needs are about 10 percent of GDP. The transport
sector accounts for a substantial portion of these
investment needs. About 85 percent of national roads
(including one- and two-digit road classifications)
are paved, but only 38 percent of provincial roads
and 10 percent of rural roads are paved (figure S.8,
panel C) indicating a major gap on resilient last-mile
domestic connectivity. Maintenance spending is also
inadequate, and because of this, the current value of
road assets is estimated to be more than a third below
their potential maximum net present value.
Cambodia’s persistent high transportation and
logistics costs are among major bottlenecks to its
economic competitiveness and diversification.
National logistics costs in Cambodia are estimated
at 26 percent of GDP (2020) which is higher than
most ASEAN countries including Thailand (14
percent) and Vietnam (20 percent). The World
Bank’s Logistics Performance Index 2023 (LPI) also
points to significant logistics challenges in Cambodia,
as the country ranked 115th out of 138 countries.
First, border clearance is slow and costly due to
poorly synchronized procedures and inadequate
cross-border facilities. Second, there are bottlenecks
along regional road corridors (for example, the
section running from Siem Reap to the Oyadav
check-point at the Cambodia-Vietnam border which
connects Cambodia with Vietnam, Thailand, and
Lao PDR, and is part of the Master Plan on ASEAN
Connectivity).35 Third, waterway connectivity
between Cambodia and Vietnam is a vital asset for
35 MPAC 2025; https://asean.org/wp-content/uploads/2018/01/47.-December-2017-MPAC2025-2nd-Reprint-.pdf.
36
transit of Cambodia exports to US and East Asia but
is underutilized due to capacity constraints. Fourth,
the full potential of railways in facilitating trade
with Thailand has not been realized, with less than 1
percent of total modal share.
In addition, Cambodia’s energy sector faces
a dual challenge of meeting rapid growth in
electricity demand in an affordable manner
while meeting its climate change commitments.
Domestic coal-fired generation accounted for around
a quarter of total electricity supply in 2022, while
hydropower generation and power imports accounted
for around a third each. At the same time, electricity
demand is growing fast, which will result in a shortfall
in supply in the absence of additional investment.
From 2003 to 2022, electricity demand in Cambodia
increased at an average of 17.8 percent per year, in
line with the experience in other countries where per
capita consumption of electricity is growing from a
low base. Rapid economic development is expected
to see demand for electricity in Cambodia increase
around fourfold between 2023 and 2040. The Bank
team estimates that more than US$ 20 billion of
investment will be needed to expand Cambodia’s
generation capacity and power grid over this period.
In the absence of adequate investments to meet this
growing demand, supply shortfalls may be expected.
In addition, continued industrial growth is likely to
see energy intensity remain high compared with the
countries in the region, putting ongoing pressure on
the energy supply.
Finally, there are large gaps in urban
infrastructure, which are hindering the
development of livable, efficient, and
environmentally sustainable cities. Reflecting
inadequate infrastructure, only 29 percent
Cambodians have access to a safely managed
water supply, and 37 percent have access to safely
managed sanitation. Inadequate investment in
wastewater infrastructure and insufficient attention
to operation and maintenance have negative impacts
on the environment and the livability of urban areas.
To date, only a few secondary cities have developed
sewerage systems and wastewater treatment plants,
financed through aid or the national budget. Phnom
Penh does not have an adequate sewerage system
or wastewater treatment plant, and wastewater
is discharged untreated into the rivers and water
bodies. Only a limited amount of solid waste is
Cambodia Economic Update November 2023
 collected.36 Moreover, the combination of rapid modest progress on education and, especially, health
urbanization, limited resources, inadequate urban metrics (figure S.9, panel B). However, Cambodia’s
management and planning systems, and the fact progress was less impressive than Bangladesh (up 20
that Cambodia’s cities are ”growing out, not up,” percent) and Myanmar (up 15 percent). Moreover,
are rendering urbanization less inclusive (inequity is Cambodia continues to rank lowly on most measures
higher than in rural areas), less efficient (congestion of human assets. For example, Cambodia is ranked
is growing as is the cost of expanding urban services 146th in the world on the HDI overall, the lowest
across growing urban sprawl), and a growing source score among its structural peers after Myanmar, and
of carbon emissions (37 percent). significantly behind more prosperous neighbors
Figure
Figure 8: Progress
8: Progress on onboosting
boosting
investment
investment in infrastructure
in infrastructure
Thailand (ranked 66th) and Vietnam (ranked 115th).
Progress in recent years was made more challenging
by the COVID‑19 pandemic, which put massive
FINALLY,
Gross
Gross
(% of
(%
capital
GDP,
capital
of GDP,
formation
period
formation
period
average) PROGRESSIndex,Index,
average)
Telecommunication
Telecommunication
20222022
Infrastructure
Infrastructure
strains on Cambodia’s
Cambodia’s
Cambodia’s
Pavement
Pavement
Road Road
Network
rate (Percent)
health
Network
rate (Percent)
system and resulted in
(2017-21,
(2017-21,
unless
unless
otherwise
otherwise
specified)
specified)
ON BUILDING HUMAN
20222022 20172017
the closure of schools for 280 days (and partially for
Vietnam
Vietnam 32% 32% 253 days) between February
National2020 and February100% 2022.
ASSETS HAS BEEN MODEST 0.75 0.75 National 100%
Thailand
Thailand
(1-digit)
(1-digit) 100%100%
Myanmar
Myanmar 32% 32% The moderate progress on education and
AND MIXED, WITH Vietnam Vietnam skills reflects
0.70 0.70 mixed progress, with strong
73% 73%
Bangledesh
Bangledesh 31% 31% National
National
SIGNIFICANTLY MORE improvements in access to education70%offset
(2-digit)
(2-digit) 70% by
Thailand
Thailand 25% 25% declining learning outcomes. There have been
REFORM
Cambodia
Cambodia NEEDED
24% 24%
TO
Indonesia
Indonesia 0.65 0.65
encouraging improvements
Provincial
38% 38%
Provincialin lifting enrolment rates
MOVE
(2017-21)
(2017-21)
Phillipines
Phillipines
THE NEEDLE
24% 24%
Cambodia
Cambodia
(2022)
(2022)
at all0.56
levels
0.56
of schooling over the past 30% 30%
decade (between
2009 and 2019/20), especially10% in10%
secondary schools
Cambodia made moderate
Nicaragua
Nicaragua
progress on improving
23% 23% (figure S.10, panel A). In 5%addition,
RuralRural enrollment
Loa PDR
Loa PDR 0.30 0.30 5%
human capital over the past decade. Cambodia in public technical and vocational schools more
Cambodia
Cambodia
improved
(2012-16) its Human Development Index (HDI)
(2012-16)
+15%+15%
21% 21%
than doubled – albeit off a low 22% base22%- driven
+29%+29% by the
Cambodia
Cambodia TotalTotal
score
Guatemala
by
Guatemala
10 percent between
14% 14%
2010 and 2021
(2016)
(2016)
(figure 0.25 0.25 +125%+125%
opening of 14 new Ministry of 17%Education
17% schools
S.9, panel A). This improvement reflects strong (raising the total to 18). Despite this progress,
progress on raising per capita income, but more primary enrollment and secondary completion rates

Figure
Figure
Figure S.9. Progress
9: Relative
9: Relative on buildingonhuman
performance
performance on capital
thethe
Human
Human over the past decade
Development
Development Index
Index
(HDI)
(HDI)
Panel A Panel B
Human
HumanDevelopment
DevelopmentIndex
Index
(HDI)
(HDI)
ranking
ranking Human
HumanDevelopment
DevelopmentIndex
Index
(HDI)
(HDI)
metrics
metrics
for Cambodia
for Cambodia
Change
Change
in score
in score
between
between
20102010
and 2021;
and 2021;
20212021
ranking
ranking Change
Change
in score
in score
between
between
20102010
and 2021;
and 2021;
20212021
scorescore

Bangladesh
Bangladesh 20% 20%129 129
GrossGross
national
national
income
income
57% 57% 40794079
(GNI)
(GNI)
per capita
per capita
Myanmar
Myanmar 15% 15% 149 149

Cambodia
Cambodia 10% 10% 146 146
MeanMean
yearsyears
of of
24% 24% 5.1 5.1
schooling
schooling
(years)
(years)
Nicaragua
Nicaragua 9% 9% 126 126

Thailand
Thailand 9% 9% 66 66
Expected
Expected
yearsyears
of of
7% 7% 11.5 11.5
schooling
schooling
(years)
(years)
Vietnam
Vietnam 6% 6% 115 115

Philippines
Philippines 4% 4% 116 116
Life expectancy
Life expectancy
3% 3% 69.6 69.6
(years)
(years)
at birth
at birth
Guatemala
Guatemala 4% 4% 135 135

Source: Human Development Report 2021/22, United Nations Development Program (UNDP).

Figure
Figure
10A:
10A:
Progress
Progress
on on
access
access
to education
to education
andand
learning
learning
outcomes
outcomes
36 A pre-feasibility study on solid waste management conducted in municipalities in Siem Reap, Kandal and Kampong Speu provinces in 2022 suggested
Net Net aenrollment
solid waste
enrollment collection
by school
by school rate
level infor
level households
Cambodia;
in Cambodia;of 45Net
percent.
Net
primary
primary
enrollment
enrollmentrate rate LowerLower
secondary
secondary
completion
completionrate rate
Percent
Percent
of population
of population (%, 2020
(%, 2020
or latest
or latest
available)
available) (%, 2020
(%, 2020
or latest
or latest
available)
available)
100 100
Vietnam
Vietnam 99% 99% Vietnam
Vietnam 98% 98% 37
90 Cambodia
90 Economic Update
90 November
90Primary 2023
Primary
+10%+10%
80 8082 82 Thailand
Thailand 98% 98% Bangladesh
Bangladesh 88% 88%
70 70
 Philippines 4% 116
Life expectancy
3% 69.6
(years) at birth
Guatemala 4% 135

Figure
Figure S.10.
10A: Progress
Progressononaccess to education and learning outcomes
access to education and learning outcomes
Panel A Panel B Panel C
Net enrollment by school level in Cambodia; Net primary enrollment rate Lower secondary completion rate
Percent of population (%, 2020 or latest available) (%, 2020 or latest available)
100
90 Vietnam 99% Vietnam 98%
90 Primary
+10%
80 82
Thailand 98% Bangladesh 88%
70
Philippines 97% Thailand 85%
60

50 Lower Nicaragua 96% Philippines 83%

47
secondary
40 +52%
31 Upper Bangladesh 95% Nicaragua 66%
30 30
secondary
+77%
20 Guatemala 89% Cambodia 58%
17
10
Cambodia 89% Guatemala 56%
0
2009 2019/20
Figure
Figure10B:
10B:Progress
Progressononaccess
accesstotoeducation
educationand
andlearning
learningoutcomes
outcomes
Panel D Panel E
Cambodia
Cambodia National
NationalLearning
Learning
Assessment
Assessment
Scores
Scores International
International
comparison
comparison
ofof
performance
performance Maths
Maths
(Grade
(Grade
6) 6) Most
Most
recent
recent
data
data Reading
Reading

584
584
7%7% 4%4% 6%6% Singapore
Singapore
535
535
Advanced
Advanced 21%
21%
13%
13% 490
490
33%
33% 2727 OECD
OECD
6%6% average
average 493
493
Proficient
Proficient 23%
23% 495
495
18%
18% Viet
Viet
Nam
Nam
487
487
Basic
Basic 7%7%
29%
29% 446
446
Malaysia
Malaysia
73%
73% 431
431

49%
49% 49%
49% 415
415
Below basic
Below basic Thailand
Thailand
34%
34% 409
409
386
386
Indonesia
Indonesia
397
397
2016
2016 2021
2021 2016
2016 2021
2021
325
325
Math
Math Khmer
Khmer Cambodia
Cambodia
321
321
language
language

Source: World Bank staff estimates based on CSES 2009 and 2019/20; Sustainable Development Report 2022 (United Nations);
Ministry of Education Youth and Sports; and PISA International Data Explorer, most recent data.
Figure
Figure11:
11:Overall
Overallprogress
progressononupskilling
upskillingCambodia’s
Cambodia’sworkforce
workforce

Highest
Highest level ofof
level education ofof
education thethe
workforce byby
workforce age
age Classification
Classification ofof
Cambodian jobs
Cambodian byby
jobs skill level
skill level
Share of of
Share total (%)(%)
total Share of of
Share total (%)(%)
total
remain below peer countries (figure S.10, panels B they progress from primary to secondary school.
100%
100% 100%
100% 100%
100% 100%
100% 100%
100% 100%
100%
and C). Moreover, increasing enrollment rates have High Skilled
High 4%4%
Skilled and declining 5%5% of basic +2+2
pptppt
College+
College+ 11%11% 12%
12% The poor quality
coincided with declining 14%
14%
learning 14%
outcomes14% (figure 5%5% 6%6%
Secondary
Secondary 5%5% Medium
Medium Skilled
Skilled +1+1pptppt
S.10,
Complete
5%5% 6%6% a 15-percentage
panel D). National tests reveal
Complete 6%6% education is driven by a range of factors, and the
point increase (to 49 percent) in the proportion lack of a solid educational foundation is having
< Secondary 40%
< Secondary
of
40%
grade 6 students 41% 41% cannot read (from 34 to
who knock-on effects at higher levels of education.
49 percent) and a 24- percentage 54%
54% increase58% (to 73
58% Poor learning outcomes in primary school can largely
percent) in the proportion of students who lack beLow
attributed
Skilled
Low Skilled to a78%
shortage
78% of effective
77% teachers,
77% pptppta
-1 -1

<basic math$7# skills

29% between
challenge compounded by an uneven distribution
Primary
< Primary 29%$7# 30% 2016 and 2021 (figure
30%
S.10, panel E). International19% tests indicate that of teachers across the country. In addition, teachers
19%
Cambodian students 18%
18%
are significantly behind their in Cambodia are inadequately prepared to do their
None
None 16%16% 12%
12%
structural peers, and that they
17%
17%
fall further
4%4%
behind as job well, with only a small proportion of teachers
2014
2014 2019/20
2019/20 20142014 2019/20
2019/20 Elementary
Elementary 14%
14% 12%
12% -2 -2
pptppt
Total
Totalworking
workingageage 1515
to to
2424 Occupations
Occupations
population
population year-olds
year-olds
2014
2014 2019/20
2019/20
38 Cambodia Economic Update November 2023
 holding bachelor’s degrees or higher qualifications. very different. While 15- to 24-year-old Cambodians
Crowded and poorly maintained schools are another are more likely than the total workforce to have
issue, with many schools operating in double shifts enrolled in secondary school (58 percent compared
and lacking basic infrastructure such as electricity to 41 percent, respectively), the vast majority drop
and bathrooms. Finally, weak governance of the out before completing secondary school. As a result,
school system exacerbates these problems. The lack only 20 percent of 15- to 24-year-olds had completed
of
Figure solid
Figure 10B: educational
10B: Progress
Progress foundations
ononaccess
access is
to to having
education
education negative
and
and
learning secondary
learning outcomes
outcomes school and/or been admitted to college
knock-on effects, impacting enrollment, and learning in 2019/20, a rate that is both largely unchanged
Cambodia
Cambodia
outcomes National
National
Learning
Learning
at higher Assessment
Assessment
levels Scores
Scores and in adult
of education International
International
over the lastcomparison
comparison
of performance
five yearsofand
performance Maths
only marginally Mathsbetter
(Grade
(Grade
6) 6) MostMost
recent
recent
datadata Reading
Reading
training. Progression to secondary school remains than the total workforce. Low school completion in
low, and dropout rates remain4%high 4%
due to past poor turn
Singapore
is highly correlated with the low-skill jobs
Singapore
584that
584
7% 7% 6% 6% 535535
performance
Advanced
Advanced and financial
21%21% and gender barriers. most Cambodians take: 90 percent of Cambodian
13%13%
33%33% 27 27 workers
OECDOECD are in elementary or low-skilled 490 occupations
490
The net result is that 6% 6%the current and emerging average
average 493493
(figure S.11, panel B). A lack of upskilling constrains
Proficient
Proficient 23%23%
Cambodian workforce remains largely low- economic
VietViet
Nam Nam upgrading, with firms reporting skills as
495495
18%18% 487 487
skilled, representing
Basic
Basic 7% 7% a growing risk to the third major obstacle to their operations and 50
29%29% 446446
Cambodia’s future development and prosperity. percent
Malaysia reporting challenges in hiring37 and filling
Malaysia
73%73% 431431
There has been little progress on overall upskilling vacancies in medium-skilled occupations such as
415 415
over
Below
Below
basicthe 49%
basic past
49%five years, with the 49% share
49% of the Thailand
Thailand
“technical and associated professionals”.
409409 38
In recent
34%34%
workforce that has completed secondary education consultations, Cambodian public and
386386private sector
and/or been admitted to college standing at only 17 Indonesia
Indonesia
20162016 2021
2021 2016
2016 20212021
stakeholders cited a lack of education 397397 and skills as
percent in 2019/20, which is essentially unchanged theCambodia
single biggest constraint to the country’s future
325325
Math
Math Khmer
Khmer Cambodia
from 2014 (figure S.11, panel A). More
language
language
concerning economic development. 321321
is that the emerging future workforce does not look

Figure
Figure S.11.
11:11:
Overall
Overall
progress
Overallprogress
onon
progress upskilling
upskilling
Cambodia’s
upskilling Cambodia’s
Cambodia’s workforce
workforce
workforce
Panel A Panel B
Highest
Highest level
level of education
of education of the
of the workforce
workforce by age
by age Classification
Classification
of Cambodian
of Cambodian
jobsjobs
by skill
by skill
level
level
Share
Share of total
of total (%) (%) Share
Share
of total
of total
(%) (%)

100%
100% 100%
100% 100%
100% 100%
100% 100%100% 100%
100%
College+
College+ High
High Skilled
Skilled 4% 4% 5% 5% +2 ppt
+2 ppt
11%11% 12%12% 14%14% 14%14% 5% 5%
Secondary
Secondary Medium
Medium Skilled
Skilled 6% 6% +1 ppt
+1 ppt
5% 5% 5% 5%
Complete
Complete 6% 6% 6% 6%

< Secondary 40%40%

< Secondary 41%41%
54%54% 58%58%
LowLow Skilled
Skilled 78%78% 77%77% -1 ppt
-1 ppt

< Primary
< Primary $7#
29%$7#
29% 30%30%
19%19% 18%18%
None
None 16%16% 12%12% 17%17% 4% 4%
2014 2019/20
2014 2019/20 2014
2014 2019/202019/20 Elementary
Elementary 14%14% 12%12% -2 ppt
-2 ppt
Total
Total working
working age age 1524
15 to to 24 Occupations
Occupations
population
population year-olds
year-olds
2014
2014 2019/20
2019/20
Source: Cambodia Socio-Economic Survey (CSES) 2014 and 2019/2020.
Note: Elementary occupations include elementary occupations workers; low-skilled occupations include skilled agricultural, and forestry and fishery
workers, service and sales workers, craft and related workers, and plant and machine operators and assemblers; medium-skilled occupations include
technicians and associate professionals and clerical support workers; high-skilled occupations include managers and professionals; ppt = percentage point.

37 World Bank 2016.

38 National Employment Agency 2018.

Cambodia Economic Update November 2023 39


RECOMMENDATIONS
To mitigate the risks of a future slowdown
in economic growth and poverty reduction,
Cambodia needs to transition to a more
sustainable, productivity-led, pattern of growth.
This transition will require further structural reform
over the next five years to better enable productivity
growth and competitiveness. Higher labor
productivity growth is essential for sustainable wage
growth, poverty reduction, and shared prosperity.
Lifting the contributions to growth from total factor
productivity and human capital will require more
and better-quality investment in infrastructure,
machinery, education and skills, health, and social
protection. Action on these critical priorities can
help ensure that Cambodia’s growth can remain
sustainable and inclusive over the long term.
Further improvements to the business
environment are critical for boosting the
productivity and competitiveness of Cambodian
firms. Weaknesses in the business environment
inhibit the productivity of labor and thereby
constrain national income. Cambodia needs to
streamline its complex business entry requirements
and restrictive entry regulations and reduce the time
and financial costs associated with issuing licenses and
permits and starting a business. Cambodia also needs
to strengthen the predictability of the regulatory
environment to help support increased private sector
investment. More competition would foster cost
reductions and innovation and promote productivity
growth by shifting market share toward more
efficient producers and incentivizing firms to become
more efficient. Finally, a well-functioning insolvency
framework would enhance resource efficiency and
productivity growth.
40
Upgrading Cambodia’s infrastructure is also
an important foundation for productivity
and international competitiveness. Cambodia
continues to have a large infrastructure financing gap,
resulting in inadequate infrastructure services that are
struggling to keep up with rapidly growing demand.
Cambodia needs to address gaps in domestic and
regional transport connectivity, which is impacting
the efficiency and resilience of supply chains and the
cost of trade. In addition, large investments are needed
in the energy sector to address the dual challenge of
meeting rapid growth in electricity demand while
meeting the country’s climate change commitments.
Further, Cambodia needs to invest in upgrading
basic urban services such as piped water, sanitation,
solid waste management, telecommunications, and
transport, as well as strengthening urban planning to
ensure its cities develop in an inclusive, efficient, and
environmentally sustainable manner.
Finally, raising learning outcomes is crucial
to address skills shortages, develop a “future-
ready” workforce, and drive Cambodia’s future
productivity growth. Firms are reporting growing
skills shortages, and labor productivity growth has
declined sharply over the past five years. Few young
Cambodian children are being enrolled in early
childhood education, which is undermining early
development and hindering mothers from returning
to work. Primary schools are experiencing a decline
in learning outcomes despite improved access. Few
students are progressing to secondary school and
those that do experience high dropout rates. Options
for post-secondary learning are limited and are of
low quality. Finally, the dynamism of the labor
market is limited by insufficient supply and demand
information. Table S.1 summarizes the challenges
and recommendations.
Cambodia Economic Update November 2023
Table S.1. Summary of the challenges and recommendations

Area Challenges Recommendations for the next 5 years

Improve The high cost • Further lower electricity prices by institutionalizing competitive processes
the business of establishing for power procurement.
environment and operating a
for firms business (i.e., high • Fully digitize the business registration portal and continue to expand the list
start-up, logistics, of institutions connected.
and electricity
• Establish a complete inventory of licenses and permits, introduce and
costs) as well as a
implement risk-based approaches to licensing, and streamline sectoral
poor overarching
licenses.
business-enabling
environment (i.e., • Support the implementation of an effective competition policy framework.
high perceptions
of corruption, • Improve the enforcement of commercial contracts through the introduction
declining rule of specialized commercial courts and increased court transparency and
of law, lack of digitalization.
competition in
• Strengthen the insolvency framework, including by adopting the
domestic product
Regulations of Insolvency Administrators and Code of Conduct.
markets).
• Strengthen the public-private dialogue forum by holding annual or semi-
annual high-level meetings and increase the transparency of the dialogue.

Boost public The infrastructure • Maximize the impact of public infrastructure investment by strengthening
and private gap remains large prioritization and selection of infrastructure projects.
investment in which is increasing
infrastructure the cost of basic • De-risk and ensure successful implementation of more public-private
infrastructure partnership (PPP) projects, including by operationalizing the new PPP
services (transport, law and building capacity of executing agencies, and by ensuring that
energy, urban, competitive bidding is the primary method of procurement.
water) and
• Make investments to address specific infrastructure gaps in regional
constraining
connectivity: improve the East-West corridor among Thailand, Cambodia,
trade and regional
and Vietnam (and the only road corridor connecting Cambodia with Lao
connectivity.
PDR); improve the inland waterway connection with Vietnam; and improve
the existing railway operations and infrastructure links with Thailand.

• Accelerate the growth of electricity supply in an affordable and sustainable

manner by: introducing least-cost planning and competitive procurement;
enhancing the grid and develop cross-border transmission links; accelerating
renewable energy development; and encouraging private sector participation
and mobilization of green funds.

• Moderate the growth in electivity demand by promoting and enforcing

higher energy efficiency standards as well as clean cooking.

• Enhance access to water and sanitation infrastructure by modernizing

the operation of public water utilities (PWOs) and help them become
creditworthy; providing more support to PWOs to allow them to expand
their service; setting up a clear institutional mandate for operation and
maintenance of wastewater at the municipality level; and establishing a tariff
framework for urban sanitation.

Cambodia Economic Update November 2023 41

 Upgrade Low enrollment • Prepare young children to learn by: boosting enrolment in early childhood
the skills of in early childhood education, including by expanding quality provision of public and private
the existing education and preschools while adopting measures to stimulate demand; and including
and future unsatisfactory education interventions in existing health, nutrition, and social protection
workforce and deteriorating services.
learning outcomes
in primary schools • Improve equitable access to primary school, including by: constructing
are leading to more schools and rehabilitating schools with poor infrastructure; measuring
a lack of basic learning regularly, especially when it is early enough to make changes, such
foundations as grades 2 and 3; and better targeting financial and other forms of support
in reading and to students at high risk of dropping out.
numeracy. This has
• Enable and motivate schoolteachers, including by: making pre-service
knock-on effects,
teacher education programs more selective and practical; improving
contributing to
professional development by providing teachers the right training and the
low secondary
right tools; ensuring that training programs are clear, doable and rewarding;
school enrollment
and incentivizing teacher effort through fair redeployments, promotions,
and high dropout
salary and accountability measures.
rates. It has also
contributed • Improve school governance, including by strengthening data systems for
to major skills better decision-making, improving school leadership, and strengthening
shortages across school-based management.
the economy,
which is hindering • Increase secondary school completion rates by alleviating: the lack of
economic foundational skills via remediation programs; gender barriers; economic and
upgrading and financial pressures; and high opportunity costs driving high dropout rates.
labor productivity.
• Upgrade the quality of technical and vocational education and training
education, including by enhancing the autonomy of institutions and
strengthening partnerships with industry.

• Enhance labor mobility and matching by strengthening labor market

demand and supply information.

42 Cambodia Economic Update November 2023

 ANNEX. CAMBODIA – SELECTED INDICATORS
SELECTED INDICATORS* 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 E
INCOME AND ECONOMIC GROWTH
GDP growth (annual %) 6,0 7,1 7,3 7,4 7,1 7,0 6,9 7,0 7,5 7,1 -3,1 3,0 5,2 5,4
GDP per capita growth (annual %, real) 4,4 5,5 5,8 5,8 5,7 5,5 5,5 5,6 6,2 5,8 -4,2 1,8 4,0 4,3
GDP per capita (US$, nominal) 810,0 889,6 949,4 1.030,1 1.105,1 1.183,2 1.281,3 1.397,0 1.527,3 1.667,8 1.583,9 1.624,7 1.765,4 1.912,9
Private Consumption growth (annual %) 8,8 10,4 4,6 5,8 4,5 9,4 5,8 3,7 6,8 5,9 -4,0 -0,7 33,0 24,3
Gross Investment ( % of nominal GDP) 16,2 16,0 17,4 18,7 20,9 21,4 21,7 21,9 22,6 23,4 24,0 25,8 39,4 24,4

Cambodia Economic Update November 2023

Gross Investment - Public ( % of nominal GDP)² .. .. .. .. .. .. .. .. .. .. .. .. .. ..
MONEY AND PRICES
Inflation, consumer prices (annual %, EOP or MRV)¹ 2,9 4,6 2,3 4,5 0,9 2,8 3,8 2,2 1,6 3,1 2,9 3,8 3,0 3,0
Inflation, consumer prices (annual %, period average) 2,6 5,5 3,0 2,9 3,9 1,2 3,0 2,9 2,5 1,9 2,9 2,8 5,5 3,0
Broad Money (% of GDP) 41,6 39,1 50,1 55,5 67,1 72,4 79,2 88,2 100,7 116,3 137,2 152,6 103,9 131,1
2
Domestic Credit to the Private Sector ( % of GDP) 27,6 28,3 38,7 52,0 62,7 74,3 81,7 86,7 99,6 114,2 139,6 166,3 177,3 ..
10 year interest rate (annual average)¹ .. .. .. .. .. .. .. .. .. .. .. .. .. ..
Nominal Exchange Rate (local currency per USD) 4.044,0 4.016,0 4.033,0 4.027,0 4.030,0 4.025,0 4.058,0 4.062,0 4.067,0 4.070,0 4.077,4 4.100,0 4.150,0 4.110,0
Real Exchange Rate Index (2015=100) 97,8 95,0 93,6 92,7 94,9 100,0 101,8 101,7 98,5 99,1 99,0 92,4 65,5 72,8
FISCAL
Revenue (% of GDP) 17,7 17,6 17,7 18,2 20,0 19,7 20,9 21,9 23,8 27,0 24,0 22,0 23,2 21,4
Expenditure (% of GDP) 21,0 23,0 21,9 21,4 21,9 20,2 21,1 22,7 23,4 25,5 28,6 29,0 27,9 28,3
Interest Payments (% of GDP) 0,3 0,3 0,5 0,7 0,7 0,3 0,4 0,4 0,4 0,4 0,5 0,5 0,5 0,5
Non-Interest Expenditure (% of GDP) 20,7 22,7 21,4 20,7 21,2 19,9 20,7 22,3 23,0 25,1 28,2 28,6 27,4 27,8
Overall Fiscal Balance (% of GDP) -3,3 -5,4 -4,2 -3,2 -1,9 -0,5 -0,2 -0,8 0,4 1,5 -4,6 -7,0 -4,7 -6,9
Primary Fiscal Balance (% of GDP) -3,0 -5,1 -3,7 -2,5 -1,2 -0,2 0,2 -0,4 0,8 1,9 -4,1 -6,5 -4,2 -6,3
General Government Debt (% of GDP) 28,7 29,7 31,6 31,3 31,8 31,2 29,1 30,3 28,3 28,1 36,1 36,3 36,7 36,8
²
External Public Debt (% of GDP) 27,2 27,0 30,5 31,6 31,5 31,2 29,1 29,7 28,5 27,9 33,9 35,1 .. ..
EXTERNAL ACCOUNTS
Export growth, G&S (nominal US$, annual %) 22,9 11,4 16,0 16,8 10,3 7,5 9,0 9,4 12,3 8,5 2,1 11,2 31,9 19,0
Import growth, G&S (nominal US$, annual %) 19,1 11,4 14,2 16,9 8,8 7,6 9,0 7,8 9,3 17,4 5,7 46,1 35,8 -8,4

43
44
SELECTED INDICATORS* 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 E
Merchandise exports (% of GDP) 38,3 38,8 41,6 44,6 45,4 45,4 45,5 45,2 46,0 46,0 51,8 62,8 70,3 72,0
Merchandise imports (% of GDP) 50,4 50,5 53,7 57,5 57,5 57,3 56,9 55,6 55,1 54,6 65,7 92,4 91,6 70,6
Services, net (% of GDP) 6,8 6,3 7,3 7,8 7,7 7,5 7,0 7,0 7,4 1,8 4,1 -5,8 -25,0 -19,4
Current account balance (current US$ millions) -1.165,3 -1.309,3 -1.390,7 -1.489,3 -1.899,7 -1.680,6 -1.756,6 -2.140,5 -2.180,1 -4.107,7 -3.221,0 -11.492,8 -7.214,3 -4.345,6
Current account balance (% of GDP) -10,0 -10,1 -9,9 -9,6 -11,3 -9,2 -8,8 -9,7 -8,9 -15,2 -12,4 -42,6 -24,4 -13,4
Foreign Direct Investment, net inflows (% of GDP) 11,8 11,8 14,0 13,0 10,6 9,5 12,0 12,1 12,6 13,2 13,5 12,6 12,6 11,4
2
Multilateral debt (% of total external debt) .. .. .. .. .. .. .. .. .. .. .. .. .. ..
POPULATION, EMPLOYMENT AND POVERTY
Population, total (millions) 14,4 14,6 14,8 15,0 15,2 15,4 15,6 15,8 16,0 16,2 16,4 16,6 16,8 16,9
Population Growth (annual %) 1,5 1,5 1,5 1,4 1,4 1,4 1,3 1,3 1,2 1,1 1,2 1,2 1,1 1,1
Unemployment Rate² 0,8 0,6 0,5 0,4 0,7 0,4 0,7 0,1 0,1 0,1 0,3 0,3 0,4 ..
Inequality - Gini Coefficient2 .. .. .. .. .. .. .. .. .. .. .. .. .. ..
Life Expectancy2 67,7 68,4 68,9 69,3 69,7 69,9 70,2 70,5 70,6 70,7 70,4 69,6 .. ..
OTHER
GDP (current LCU, billions) 47.048 52.069 56.617 62.220 67.740 73.423 81.242 89.831 99.544 110.014 105.892 110.506 122.847 133.219
GDP (current US$, millions) 11.634 12.965 14.038 15.451 16.809 18.242 20.020 22.115 24.476 27.030 25.970 26.953 29.602 32.413
GDP per capita LCU (real, thousands) 2.103 2.219 2.347 2.484 2.625 2.770 2.922 3.086 3.277 3.468 3.322 3.383 3.520 3.671
³
Human Development Index Ranking 147 148 147 147 146 148 148 147 148 147 148 146 .. ..
2
CPIA (overall rating) 3,4 3,4 3,5 3,4 3,4 3,4 3,4 3,4 3,4 3,4 3,4 3,5 3,6 ..
2
Economic Management 4,0 3,8 3,8 3,8 3,8 4,0 4,0 4,0 4,2 4,2 4,2 4,2 4,2 ..
2
Structural Policies 3,3 3,5 3,7 3,7 3,7 3,5 3,5 3,3 3,3 3,3 3,3 3,5 3,5 ..
Policies for Social Inclusion and Equity2 3,4 3,5 3,5 3,4 3,4 3,4 3,4 3,4 3,4 3,5 3,5 3,6 3,8 ..
Public Sector Management and Institutions2 2,7 2,8 2,8 2,8 2,8 2,7 2,7 2,7 2,6 2,6 2,7 2,8 2,8 ..

Notes: “..” indicates not available. E = estimate, F = forecast. Data from MFMOD unless otherwise noted.
1/ World Bank GEM database; MRV = Most recent value.
2/ World Development Indicators Database and World Bank Staff Estimates.
3/ The HDI ranking in 2001 is in relation to 175 countries and in 2010 in relation to 169 countries. Methodological enhancements in HDI calculations have resulted in notable improvements in the countries’ rankings.
Sources: MFMOD Database, World Bank WDI and GEM databases, IMF.

Cambodia Economic Update November 2023

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48 Cambodia Economic Update November 2023