ADB Lowers Cambodia's 2026 Growth Outlook to 3.9% as Tourism Weakens

The Asian Development Bank (ADB) has trimmed 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 ADB expects growth to pick up to 4.7% in 2027, buoyed by a robust manufacturing sector, broader export markets and steady foreign direct investment.

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

"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 Forecast Revised Upward

The bank also lifted its inflation estimates, attributing the change to climbing global oil prices and higher 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 moderating to 2.8% in 2027, with fuel tax relief and a broadly steady riel expected to ease price pressures.

Fiscal policy is projected to stay accommodative, as spending on infrastructure, human capital and social protection under the "Comprehensive Intervention Program" helps prop up economic activity.

The current account deficit is also seen widening in 2026, driven by rising import costs and reduced tourism earnings. Nonetheless, sustained foreign direct investment should help shore up the country's international reserves.

Manufacturing Leads the Way

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

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

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

Tourism Slump Deepens

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 pre-pandemic levels, the ADB reported.

The bank said persistent geopolitical tensions and the closure of the Cambodia-Thailand land border had hurt tourism-linked industries, including transport, hospitality and trade.

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

The ADB noted 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.