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Cambodia At a Critical Juncture In Its Development Journey

With FDI Intelligence highlighting that 'Cambodia carries the strongest global FDI momentum into 2024' an excellent overview by Roland Rajah, Director, International Economy Program at Lowy Institute from Cambodia Investment Review.


Cambodia is a development success story but one that is incomplete and now at a critical juncture. Politically, there is the ushering in of a new generation of leaders that aim to re-energise and sustain Cambodia’s impressive long term developmental progress. This agenda is manifest in the government’s ambition to reach upper middle-income country (UMIC) status by 2030. Yet, the economy has also been heavily damaged by the international economic shocks of recent years including the Covid-19 pandemic, Ukraine crisis, and economic problems in China. Cambodia’s economic and development progress has been substantially set back as a result. Meanwhile, climate change and rising geostrategic tensions in the region also pose significant challenges.


Cambodia reaching UMIC status would represent a truly enormous achievement, seeing the country transformed from a poor, post-conflict society to a reasonably prosperous one in just several decades. Whether, when, and how Cambodia can reach UMIC status is the subject of a detailed study being prepared by CDRI and expected to be published next year. For now, the prospect of reaching the UMIC ambition by 2030 is unclear, in part as Cambodia’s GDP numbers are undergoing rebasing and are yet to be released. But there can be no question that delivering on this ambition by 2030 is a very challenging task given the international shocks that Cambodia’s economy has endured and a global economic environment that remains difficult. Economic recovery will likely continue to proceed slower than desirable. The IMF for instance projects Cambodia’s economic growth at 5.3% this year and picking up towards 6% in future years – all well below the 7% pre-Covid pace. Notably, recent international shocks have imposed considerable costs on Cambodia’s economic trajectory, with its economy for instance likely to be around 14% smaller in 2023 than what was previously projected by the IMF just before the onset of the pandemic.

 

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