Cambodia’s real growth is projected to remain strong, expanding at 6.9 per cent in 2017 and 2018.
Risks to this outlook include the fallout from further rises in US interest rates, a slower-than expected economic recovery in Europe, and uncertainties over global trade.

US monetary policy tightening is expected to result in the dollar appreciating vis-a-vis the euro and other currencies, which would make Cambodia’s exports and tourism relatively more expensive for the rest of the world, and therefore less competitive.

Continued interest rate hikes in the US may weaken prospects of further capital inflows to Cambodia. Any disruption in global trade flows will have substantial negative impacts on Cambodia, given its high level of dependence on exports, particularly garments and footwear, as one of the main drivers of economic growth.

Improving labor productivity would be fundamental for Cambodia to remain competitive, given rising competition from other low-wage garment exporting countries.

As a result of competition from low-wage countries, year-on-year growth of garment exports from Cambodia fell to 8.4 per cent in 2016, compared with 12.3 per cent growth in 2015.

Growing competition slashed garment export prices to all major destinations. Export prices to the US market were the hardest hit, dropping by 7.2 per cent in 2016.