ADB Lowers Cambodia's 2026 Growth Forecast to 3.9% Amid Tourism Decline

The Asian Development Bank (ADB) has revised its economic growth forecast for Cambodia to 3.9% in 2026, a decrease from the previously projected 4.1%. This adjustment is largely attributed to a significant decline in tourism activity, which has historically been a cornerstone of the country's economy.

Yasmin Siddiqi, ADB Country Director for Cambodia, stated that Cambodia’s economy continues to demonstrate resilience despite these challenges. She mentioned that strong manufacturing exports and investment inflows were helping to offset challenges facing tourism. The ADB expects growth to rebound to 4.7% in 2027, driven by robust manufacturing, export diversification, and continued foreign direct investment.

During the first half of 2026, international visitor arrivals plummeted by 47.9% year-on-year to just 1.8 million, reflecting only about half of pre-pandemic levels. This downturn is attributed to ongoing geopolitical tensions and the closure of the Cambodia–Thailand land border, which has adversely affected related industries such as hospitality, transport, and retail.

“Cambodia’s economy continues to demonstrate resilience.”Yasmin Siddiqi, ADB Country Director for Cambodia

Tourism has traditionally provided significant employment and foreign currency earnings for Cambodia, and the prolonged downturn poses risks for businesses and workers reliant on international travel. The ADB's report indicates that the services sector is particularly vulnerable due to this decline.

In addition to the tourism slump, the ADB has raised its inflation forecast for Cambodia, predicting an average inflation rate of 4.7% in 2026, up from earlier estimates. This increase is driven by higher global oil prices and rising import costs, with inflation peaking at 7.2% in May before moderating to 5.5% in July. The ADB anticipates inflation will ease to 2.8% in 2027, supported by stable currency measures and fuel tax relief.

The Cambodian economy remains heavily reliant on imported goods, making it susceptible to fluctuations in global commodity prices. ADB highlights the government’s Comprehensive Intervention Program as a vital tool for supporting vulnerable households and sustaining economic activity through investments in infrastructure and social protection.

“Continued investment inflows should support production capacity and Cambodia’s integration into regional and global supply chains.”Asian Development Bank

Despite the challenges, the manufacturing sector has shown resilience, with non-garment manufactured exports increasing by 38.4% year-on-year in the first half of 2026. This growth reflects a shift towards higher-value products, including electrical components and vehicle parts. Garment exports, while still significant, grew by a more modest 6.3%, totaling $8 billion during the same period.

Looking ahead, agriculture is expected to contribute modestly to growth, buoyed by external demand for products like cashews and milled rice. However, potential risks remain, including the impact of El Niño-related weather disruptions, which could affect agricultural production and rural livelihoods in late 2026 and early 2027.

In summary, while Cambodia faces a period of slower growth, the ADB's outlook suggests that manufacturing and foreign investment will play increasingly crucial roles in the country's economic landscape as tourism and construction sectors struggle to recover.