Between January 2022 to July 2022, Cambodia’s exports rose 47 per cent compared to the same period a year earlier.

But due to the signs of an impending recession in the US and Europe, demand and purchase orders have seen significant drops in the second half of 2022.A quarter of garment manufacturers in Cambodia are looking to partially suspend operations in September or may require their workers to work less hours. Operations in some 100 factories are suspended, affecting around 10,000 workers.The entire sector, consisting over 1,200 garment, travel goods and footwear manufacturers, employs about one million workers, making it the largest employment segment in the country.

Although demand for garments is usually inelastic, or less sensitive to changes in income, sharp drops resulting in a global recession would be felt in small nations, such as Cambodia. A multiplicity of negative factors ranging from geopolitical tensions to economic uncertainty to extreme weather patterns suggests that the next six months look bleak for global growth and Cambodia’s garment exports to the US and EU.

Though the outlook is grim, as reflected by the western purchasing power and a slowdown in purchase orders, diversification of export markets and production are key to avoid similar problems in future. While Cambodia’s growth has been remarkable, it is insufficiently diversified in products, markets, and factor inputs.