The Asian Development Bank (ADB) has lowered its projection for Cambodia's economic growth in 2026 to 3.9%, down from the 4.1% it forecast in July, pointing to softer-than-anticipated performance in tourism and related services.

According to its Asian Development Outlook (ADO) September 2026, published on September 23, the bank expects growth to pick up to 4.7% in 2027, buoyed by a robust manufacturing sector, broader export markets and ongoing foreign direct investment.

"Cambodia's economy continues to demonstrate resilience," said Yasmin Siddiqi, the ADB's country director for Cambodia.

"Strong manufacturing exports and buoyant investment inflows are helping offset tourism sector challenges. Continued efforts to diversify the economy, enhance competitiveness, support vulnerable households and strengthen resilience will be important for sustaining inclusive growth," she added.

Inflation and Fiscal Policy

The bank also revised its inflation expectations upward, blaming higher global oil prices and climbing import costs. Inflation climbed from 2.6% year on year in February to 7.2% in May, before slowing to 5.5% in July.

The ADB now anticipates inflation will average 4.7% in 2026 before falling to 2.8% in 2027, with fuel tax relief and a largely stable riel helping to temper price increases.

Fiscal policy is likely to stay supportive, as spending on infrastructure, human capital and social protection under the "Comprehensive Intervention Program" helps keep economic activity going.

The current account deficit is projected to grow in 2026, driven by rising import costs and reduced tourism income. Nonetheless, sustained foreign direct investment should help bolster the country's international reserves.

Manufacturing Leads Growth

Industry continues to be the primary engine of the economy, with non-garment manufactured exports surging 38.4% year on year in the first half of 2026.

This increase points to greater diversification into higher-value goods such as electrical components, vehicle parts, tyres and wooden products. Garment exports rose 6.3% to $8 billion, while activity in construction and real estate stayed muted.

The services sector, by contrast, is set to underperform earlier expectations as tourism keeps declining.

Tourism Slump

International arrivals dropped 47.9% year on year to 1.8 million in the first half of 2026, leaving visitor numbers at just over half of their pre-pandemic levels, the ADB reported.

The bank attributed the slump to persistent geopolitical tensions and the closure of the Cambodia-Thailand land border, which have hurt tourism-linked industries including transport, hospitality and trade.

Agriculture is expected to contribute modestly to growth, helped by export demand for cashews, cassava and milled rice.

The ADB warned that risks to Cambodia's outlook remain skewed to the downside, including the potential for El Niño-related weather disruptions in late 2026 and early 2027.