AKP Phnom Penh, November 28, 2025 --

Tourism faces significant setbacks from the border conflict with Thailand this year but investment has so far remained resilient, a Chinese economist says.

Yang Chunyu, desk officer for Cambodia at the ASEAN+3 Macroeconomic Research Office (AMRO) in Singapore, reckons the conflict’s impact “may take time for the economy to absorb.”

This will depend on the pace of normalisation by both Cambodia and Thailand along with the Cambodian government’s policy response to the shocks.

“Lower remittances are likely to have the heaviest impact on the economy, given that a large number of migrant workers have returned from Thailand,” Yang says in an analytical note published earlier this month.

“In the tourism sector, the sharp decline in Thai visitors — together with travel advisories issued by other countries — suggests that Cambodia’s tourism industry will face significant setbacks this year.”

She expects “deeper and more prolonged impacts if tensions persist”, noting reports of several countries — including the U.S., U.K., Australia, Canada, and Korea — issuing travel advisories or cautions on Cambodia.

But “investment activity has remained resilient to date,” Yang notes.

“Investment sentiment earlier this year was dampened by the imposition of high tariffs by the U.S. administration, but later recovered following a substantial reduction in tariff rates to 19 percent.”

On the other hand, Thai-based manufacturers with operations in Cambodia “have been forced to use sea routes and other means, resulting in higher transportation costs and production delays.”

ALTERNATIVE SOURCES FOR IMPORTS

Yang — who used to work for the People’s Bank of China — says she’s not too worried about the inflationary impact of reduced imports from Thailand amid government bans on some items and public boycotts of Thai goods and services.

"Data for June to September show a sharp decline in imports from Thailand, ranging from vegetables to fruits, and from gasoline to diesel,” she notes.

But “alternative import sources have partially substituted for Thai goods … Should demand continue shifting toward other countries or local products, the impact on inflation is expected to remain mild.”

AMRO expects the Cambodian economy to grow by 4.9 percent this year — in line with the latest forecast by the International Monetary Fund released this week.

THREE SCENARIOS

Looking ahead, growth next year is projected to edge up to 5.0 percent, “assuming a gradual normalisation of border activities and recovery in labour mobility and tourism,” Yang says.

“However, under an adverse scenario where border closures persist through mid-2026, growth could slow to around 4.5 percent…

“In a severe scenario involving renewed armed clashes, Cambodia’s growth could fall below 4 percent.”

The Chinese economist notes that the government has already taken several measures to support affected households and stabilise local communities.

“Given the sharp fall in remittance inflows and the large-scale return of Cambodian migrant workers from Thailand, policy support for affected households remains urgent,” she says.

FISCAL SUPPORT

“To cushion the immediate economic impact, the government may consider providing fiscal supports to social assistance, job creation programmes for returning workers, and border provinces most affected by the disruption in trade and tourism.”

“In parallel, the government could accelerate public investment projects that enhance economic resilience, including infrastructure along alternative trade routes and logistics hubs, which would both stimulate short-term demand and strengthen long-term connectivity.

“Coordination with development partners can also help mobilise concessional financing and technical assistance for these targeted interventions.”

By Sao Da