The BGA Cambodia team, led by Managing Director Bora Chhay, wrote an update to clients on Cambodia’s 2026 economic outlook.

Context

  • Cambodia enters 2026 with strong economic momentum built on robust trade expansion, accelerating investment inflows and deepening integration into global supply chains. Total trade reached $65.2 billion in 2025, a year-on-year increase of 18 percent, with exports of $31.3 billion, reinforcing Cambodia’s emergence as a regional manufacturing and logistics platform. Investment approvals surged to $10 billion the same year, a year-on-year increase of 45 percent.
  • This momentum is structurally reinforced by strong industrial diversification into garments and footwear; travel goods; electronics and electrical appliances; agriculture and agro-processing; bicycles; automotives, auto parts and car tires; renewable energy; furniture and wood; and construction materials. Cambodia continues to expand market access across Asia, Europe, North America and the Middle East and build on its trade architecture, which includes the Regional Comprehensive Economic Partnership (RCEP); the Association of Southeast Asian Nations’ (ASEAN) free trade agreements; bilateral agreements with China and Korea; and a comprehensive economic partnership agreement with the United Arab Emirates.
  • Looking ahead, Cambodia’s 2026 outlook will be shaped by three decisive dynamics:
  • First, Cambodia’s commercial exposure to Thailand remains limited. At its 2024 peak, Cambodia’s exports to Thailand remained below $1 billion, while recent border disruptions have accelerated import substitution toward domestic production and alternative suppliers from Vietnam, China, Malaysia, Indonesia, the European Union and the United States, strengthening industrial resilience.
  • Second, Cambodian officials believe trade negotiations with Washington present an opportunity to further reduce U.S. tariffs on strategic exports, including garments, footwear and travel goods, below 19 percent. This would materially lift competitiveness, attract new manufacturing investment and accelerate diversified export-led growth. So far, the U.S. administration has not indicated that it is open to considering lowering these tariffs.
  • Third, border stability with Thailand has become a key variable in Cambodia’s macroeconomic stability. If the current general ceasefire holds, growth will continue apace. If it fails, prolonged instability could trigger fiscal strain, displacement and a confidence shock, increasing the risk of an economic contraction.
  • Despite Cambodia’s strong economic growth last year, security conditions at the border with Thailand influence more than trade flows. They affect tourism demand, investor risk perception, public spending priorities, public infrastructure development, agricultural and retail communities in the border provinces. A prolonged disruption would create economic shock through labor displacement, farm output losses and weakened consumer confidence.

Significance

  • Cambodia’s economic expansion is increasingly driven by a maturing light manufacturing base and a rapidly improving logistics system. Export-oriented production has moved beyond a narrow garment model into a broader industrial platform that includes travel goods, electronics, agro-processing, bicycles, and automotive components, assembly and manufacturing. These sectors are increasingly embedded in regional and global supply chains, with exports reaching $31.3 billion and market access spanning 169 countries.
  • Cambodia is now operating at scale, supported by a growing skilled workforce, improving port throughput and industrial special economic zone development. This has helped increase capacity and lower logistics costs. At the same time, the country is expanding airport connectivity and strengthening inland transport corridors. Cambodia’s major trading partners include the 15-member RCEP countries, the European Union, the United Kingdom, the United States, Canada, the United Arab Emirates and India.

Implications

  • Investment is converting into productive capacity, and capital inflows are being converted into physical production. New factories, power projects, special economic zones and processing facilities are expanding output capacity across the country. In 2025, Cambodia entered a new investment expansion cycle. The country attracted fixed asset investment projects worth $10 billion — a 45 percent year-on-year increase. The government also approved 630 projects across multiple sectors, mainly industry, infrastructure, agriculture and agro-industries, renewable energy and tourism. This could create around half a million new jobs. The geographic spread of the new projects is creating second-tier industrial centers, strengthening labor absorption and raising household income in areas beyond Phnom Penh. This diffusion of investment is also building a more balanced and resilient growth model.
  • Ongoing border disruptions between Thailand and Cambodia have accelerated a strategic realignment of Cambodia’s import structure. Bilateral trade declined around 15 percent in 2025 to $3.7 billion from $4.3 billion in 2024. Cambodia’s exports to Thailand declined 14.2 percent in 2025, dropping to $732 million from $845 million in 2024 — within Cambodia’s $30 plus billion export economy. Dependence on Thai suppliers is being reduced by Made in Cambodia production and diversified sourcing from Vietnam, China, Malaysia, Indonesia, Europe and the United States. This transition is encouraging local manufacturing of food products, consumer goods, construction materials, pharmaceuticals and machinery components. The shift is reducing vulnerability to single-country supply risks and promoting a strong domestic industrial base.
  • Cambodia’s trade position is increasingly shaped by preferential market access arrangements that competitors lack. RCEP places Cambodian producers inside the world’s largest trade bloc, while multilateral ASEAN and bilateral free trade agreements with China and Korea and a comprehensive economic partnership agreement with the United Arab Emirates provide tariff advantages across key Asian markets. Parallel frameworks with Europe, the Middle East and North America are widening the commercial frontier for Cambodian exports. Market access diversification has become a key driver for export growth and investment attraction.

We will continue to keep you updated on developments in Cambodia as they occur. If you have any comments or questions, please contact BGA Cambodia Managing Director Bora Chhay at bchhay@bowergroupasia.com.

Best regards,

BGA Cambodia Team

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Managing Director

Bora leads BGA’s practice in Cambodia. He is a highly regarded government affairs and public policy expert who helps clients resolve business issues, navigate regulatory and legal challenges, expand operations, explore new investment opportunities and enter Cambodia’s market.  Prior to joining BGA, Bora served for five years as a fast-moving consumer goods (FMCG) corporate and regulatory affairs professional. In this role, he helped transform his company’s government relations and corporate affairs unit into a more effective business-driven group. Notwithstanding Cambodia’s difficult and highly regulated macro environment, Bora played a key role in developing and executing government relations and corporate affairs ... Read More