PHNOM PENH: The World Bank expects the Cambodian economy to expand by 4.0 percent this year and 4.5 percent next year, cutting its previous forecasts in January to reflect heightened international trade tensions and policy uncertainty.
In its latest Global Economic Prospects report released in Washington Tuesday, the bank said international trade turmoil had forced it to lower forecasts in nearly 70 percent of all economies—across all regions and income groups.
For Cambodia, the revised forecast for 2025 is down 1.5 percentage points from the bank’s January projection. The forecast for next year is down 1.0 point.
“Emerging-market and developing economies reaped the rewards of trade integration but now find themselves on the frontlines of a global trade conflict,” said M. Ayhan Kose, the bank’s deputy chief economist.
NEED FOR NEW PARTNERS
“The smartest way to respond is to redouble efforts on integration with new partners, advance pro-growth reforms, and shore up fiscal resilience to weather the storm,” he said.
“With trade barriers rising and uncertainty mounting, renewed global dialogue and cooperation can chart a more stable and prosperous path forward.”
Among emerging and developing ASEAN economies apart from Cambodia, growth this year is now forecast at 5.8 percent in Vietnam and 5.3 percent in the Philippines (down 0.8 points from January for both), 4.7 percent in Indonesia (down 0.4 points), 3.9 percent in Malaysia (down 0.6 points), 3.5 percent in Laos (down 0.2 points) and 1.8 percent in Thailand (down 1.1 points). Myanmar’s economy is forecast to shrink 2.5 percent (down 4.5 points)
‘LARGE EXPOSURES’
“The increase in trade policy uncertainty, reduced confidence, and spillovers from softer external demand in major advanced economies and China are likely to curtail exports and private investment in the region, since there are several economies with large exposures to global trade, notably Cambodia, Thailand, and Viet Nam,” the bank said.
“While some economies will benefit from fiscal policy support—such as social spending programmes and public investment in Indonesia, Malaysia, Thailand, and Viet Nam— the full macroeconomic effects of higher trade barriers, which are hard to predict, could weigh on growth.”
DOWNSIDES AND UPSIDES
The bank said risks to the regional outlook for emerging and developing economies in East Asia and the Pacific “have intensified since January, including the possibility of a reversion to previously announced higher trade barriers and persistently elevated policy uncertainty.
“Other downside risks include tighter global financial conditions, spillovers from weaker growth in major economies, increased geopolitical tensions, and natural disasters.
“There are, however, some upside risks associated with larger-than-expected fiscal expansions in China or major advanced economies and productivity gains from technological adoption.”
On its global forecast for 2.3 percent growth this year, down from 2.7 percent in January, the bank said growth could rebound faster than expected if major economies could mitigate trade tensions—which would reduce overall policy uncertainty and financial volatility.
“If today’s trade disputes were resolved with agreements that halve tariffs relative to their levels in late May, global growth would be 0.2 percentage point stronger on average over the course of 2025 and 2026,” it said.
‘LIBERALISE MORE BROADLY … DIVERSIFY TRADE’
Amid rising trade barriers, the bank urged developing economies “to liberalise more broadly by pursuing strategic trade and investment partnerships with other economies and diversifying trade—including through regional agreements …
“Policymakers should focus on mobilising domestic revenues, prioritising fiscal spending for the most vulnerable households, and strengthening fiscal frameworks.
“Finally, to accelerate economic growth, countries will need to improve business climates and promote productive employment by equipping workers with the necessary skills and creating the conditions for labour markets to efficiently match workers and firms,” the bank said.