Cambodia Country Risk Report October 2026

A country’s risk rating is based on four areas: political, economic, commercial and technological risk. Each area is scored from 1 to 10, where 1 is the highest risk and 10 is the lowest.

Political Risk: October Update

Elevated at 4

The government remains firmly in charge of the political environment but faces a fresh challenge from the fallout from the border conflict with Thailand. It has left many Cambodians who depended on jobs in Thailand and sent remittances back to their families in hardship. The energy shock caused by the conflict in the Middle East has also affected many Cambodians.

The Diplomat publication believes the problems facing Cambodia are exacerbated by the dual nature of the economy. This consists of a highly productive export sector, dominated almost entirely by foreign, primarily Chinese, investment, which manufactures garments and footwear for global companies. On the other side lies a fragmented and technologically deficient domestic economy consisting mainly of small and medium-sized enterprises (SMEs) that struggle to compete internationally and remain concentrated in the informal sector.

The Diplomat says that “all of this points to the exhaustion of Cambodia’s existing growth model” and that a structural transformation of the domestic economy is now required. The question is whether the ruling elite - with their entrenched business interests - has the vision to see the scale of the problem and address it.

The World Bank has called for a three-stage reform effort involving: safeguarding subsistence farms through social protection; boosting SME productivity through better credit access and digitalisation; and formalising high-performing local businesses to help them qualify as suppliers to major foreign investors.

The government may adopt these structural reforms. But to succeed, the authorities will also need to strengthen the technocratic capabilities of the government and move more quickly towards adopting the rule of law. Worldbox Business Intelligence believes the government is capable of making this transition but it is far from guaranteed.

Political Risk - Context

Nominally a parliamentary democracy with a bicameral parliament and a king as head of state, Cambodia is a one-party state. Hun Sen, who became prime minister in 1985 and his Cambodian People’s Party (CPP) dominates the political scene. Hun Sen stepped down as prime minister in 2023 with his eldest son Hun Manet being sworn in as the new prime minister.

The transfer followed a landslide victory for Hun Sen’s ruling Cambodian People’s Party at the July 2023 election. It won 120 of 125 seats. The US, EU and other Western nations refused to send observers to the poll, saying it was neither free nor fair. In May, the main opposition party and the sole credible challenger to Hun Sen was barred from contesting the vote. The decision by the electoral authorities to ban the Candlelight Party for allegedly filing the wrong paperwork echoes developments in the run up to the 2018 election.

Worldbox Business Intelligence does not expect any significant shifts in policy making following the succession of Hun Manet. Even though he has relinquished the prime minister’s job, Hun Sen, 74, is expected to retain a large amount of control as his party’s president and president of the Senate.

The border conflict between Thailand and Cambodia will continue to weigh on the two interdependent economies for years to come, according to the East Asia Forum. It says that Cambodia’s reliance on remittances and trade with Thailand means it is likely to bear higher costs, with displaced returnees pushed into insecure work and limited access to land, housing and labour markets.

The publication adds that land border trade has fallen to virtually zero since the border closed. Key goods affected include petrol, petroleum products and agricultural products. Many of these are items for which Cambodia lacks comparative advantage - alternative sourcing or domestic production is possible but will likely come at a higher cost to consumers.

The ⁠daughter of the recently pardoned former opposition leader Kem Sokha was appointed special envoy to Prime Minister Hun Manet in August. The role gives Kem Monovithya a rank equivalent to a minister. The move reflects the government’s policy of seeking to bring opposition leaders into the regime and neutralise any potential threat.

Economic Risk: October Update

Elevated at 3

Cambodia’s economy grew by 5.3% in 2025, slowing from 6% in 2024 as domestic and external shocks weigh on activity, according to the IMF, which completed an Article IV consultation mission to the country in July 2026. The report said that domestic demand, construction, and real estate remained subdued. A leadership transition, tariff shocks, online scams and a border conflict with Thailand that had serious political, economic and security repercussions weighed on economic growth in 2025.

The IMF projected that growth would slow further to 3% in 2026 before recovering in 2027. It said that higher energy prices, softer external demand, and reputational damage associated with scam activities weigh on economic activity, weaken tourism and pose risks to financial stability.

Inflation averaged 2.5% in 2025 but rose sharply in May 2026, and is projected to average 5.6% in 2026, reflecting the impact of higher energy prices. The IMF forecast that inflation will moderate in 2027. The riel has remained broadly stable, serving as a nominal anchor for the economy.

The border conflict with Thailand caused significant economic losses. Tourism, for example, accounts for nearly 10% of GDP and was hard hit. International arrivals fell by 17% to 5.57 million, with the country experiencing a 43% fall in December alone. In addition, media coverage surrounding cyber-scam compounds affected Asian markets.

As mentioned in the political risk section, border crossings between Cambodia and Thailand remain closed – they were shut after fighting broke out in July 2025. The closure of the border trade has affected key imports to Cambodia, including petrol, petroleum products and agricultural products. With few alternative sources of supply available, the result has been a sharp hike in the cost of these essential goods. Thailand is Cambodia’s third-largest import partner, after China and Vietnam.

Millions of Cambodians work abroad, mainly in Thailand, and their remittances are a key economic lifeline for many families. Nearly a million had returned to Cambodia by the end of 2025. Many have failed to find jobs in Cambodia. The result, according to a UN assessment released in April 2026 is a looming crisis of landlessness and household debt that could undo years of development gains. According to the National Bank of Cambodia, total remittances fell 23.6% to US$2.1 billion in 2025. However, Thailand remained the largest source of remittances, accounting for 77.3% of total inflows.

However, there is one silver lining for the economy. The border conflict has prompted Cambodians to boycott Thai goods. That, according to Nikkei Asia, has encouraged local companies to tap into a resurgent nationalism. They have launched thousands of new products to seize a hitherto unreachable slice of the retail market.

The news agency adds that in the first five months of this year, 2,353 new Cambodian products were registered with authorities. In the whole of 2024 the figure was 2,158, and in 2025 it was 3,625, according to Ministry of Industry data. In addition, 700 new factories opened in 2025, more than double the 2024 figure and almost triple the 2023 number. Tens of thousands of additional workers are being hired.

Nikkei Asia quoted Te Taingpor, president of the Federation of Association for Small and Medium Enterprises of Cambodia, as saying that before 2025, Cambodian products accounted for about 2%-3% of the total nationwide. Now it is about 30%.

Economic Risk - Context

Cambodia experienced some of the highest economic growth in the world in the two decades prior to the pandemic. Driven by garment exports and tourism, annual growth averaged 7.7% between 1998 and 2019. The rapid growth resulted in significant gains in poverty reduction with the poverty rate in Cambodia declining to 18% in 2020 from just under 50% percent in 2007. From 2000 to 2020, life expectancy increased from 58 years to over 70.

Since 2018, total exports to the world have doubled to USD 26 billion, and newly approved investment projects surged 88%, reflecting robust investor confidence and the global relocation trend.

Unlike other countries, Cambodia cannot simply respond to the higher inflation seen in 2026 by raising interest rates. That reflects the highly dollarized nature of the Cambodian economy. Around 80 to 90% of the cash and bank deposits used in Cambodia are US dollars, not riel. Consequently, the interest rate on borrowings is influenced mostly by US and not Cambodian monetary policy. The main tools left to the central bank include instructing banks to increase their reserves, meaning they have less available to lend, and managing the exchange rates to contain imported inflation. 

The IMF, in its Article IV assessment released in July 2026, has urged the government to introduce structural reforms to strengthen Cambodia’s growth model and resilience, particularly as the country prepares for graduation from Least Developed Country status. Priorities include improving the business climate, strengthening governance and the rule of law, enhancing skills and labour market absorption, supporting export diversification, and attracting higher-quality investment. Improved energy security and efficiency, greater climate resilience, and reforms to support renewable energy would also improve competitiveness.

According to a July report from the ASEAN+3 Macroeconomic Research Office (AMRO), Cambodia’s economy has entered a new phase. Rather than rebounding from a single crisis, it is adapting to repeated external shocks that are becoming a more permanent feature of the global economy.

AMRO argues that while the near-term outlook has become more challenging, Cambodia’s macroeconomic fundamentals remain broadly sound, supported by resilient manufacturing exports, continued foreign direct investment (FDI), and low public debt.

It added that manufacturing remains the main engine of growth, supported by resilient garment exports and sustained FDI inflows despite the introduction of US reciprocal tariffs. Importantly, public debt remained below 30% of GDP, preserving valuable policy space to respond should conditions deteriorate further.

Commercial Risk: October Update

Elevated at 4

Nikkei Asia has reported that new rounds of US sanctions targeting alleged cyberscam networks in Cambodia are increasingly spilling over into the country’s legitimate economy. This is increasing compliance risks for businesses and deepening concerns over the country's global reputation, following similar action by the UK earlier this year.

The publication cites measures announced by the US Treasury Department's Office of Foreign Assets Control that target five Cambodian citizens and a network of affiliated companies accused of links to cyberscam operations and money laundering. Nikkei Asia said those sanctioned include politically-connected tycoons and casino operators with business interests spanning finance, real estate and utilities.

In August 2026, the Association of Banks in Cambodia (ABC) outlined three strategic priorities to guide the banking sector through its next growth cycle, focusing on resilience, financial integrity and productive finance amid asset-quality pressures and rising digital risks.

The three strategic priorities are as follows:

• Banking Resilience and Responsible Credit, focusing on strengthening early risk recognition, prudent provisioning and restructuring, realistic asset valuation, NPL resolution, and capital and liquidity resilience.

• Financial Integrity, Public Trust and Secure Digital Finance, which calls for stronger anti-money laundering and countering the financing of terrorism (AML/CFT) measures, fraud prevention, consumer protection, governance, cybersecurity, operational resilience and coordinated responses to emerging risks.

• Productive and Sustainable Finance, aimed at expanding fit-for-purpose finance for viable SMEs, trade, agriculture and agro-processing, infrastructure and green investment through cash-flow data, supply-chain finance, risk-sharing and taxonomy-aligned products.

Commercial Risk - Context

The US State Department’s 2025 Investment Climate Statement on Cambodia says that the country offers several foreign direct investment (FDI) incentives to investors including 100% foreign ownership of companies, corporate tax holidays, reduced corporate tax rates, duty-free import of capital goods, and no restrictions on capital repatriation.

However, it points out that US investors report various challenges. These include a small market size, systemic corruption, limited supply of skilled labour, inadequate infrastructure (including high energy costs), lack of transparency in some government approval processes, and preferential treatment given to local or other foreign companies that engage in acts of corruption, tax evasion, or otherwise take advantage of Cambodia’s weak regulatory environment.

Cambodia ranked joint 163rd out of 182 countries in Transparency International’s (TI) 2025 Corruption Perceptions Index, unchanged from the previous year. Cambodia is the second-lowest-rated country in the Association of Southeast Asian Nations (ASEAN), ahead of only Myanmar, and one of the lowest-rated countries in Asia. Officials said the report did not reflect the current reality in Cambodia.

The Heritage Foundation ranks Cambodia as “mostly unfree”, according to its 2026 Freedom Index. The country’s score of 58.2 makes its economy the 98th freest out of 184 countries in the world. Cambodia is ranked 21st out of 39 countries in the Asia-Pacific region. The country’s economic freedom score is lower than the global average and higher than the regional average. Cambodia’s economy is considered “mostly unfree” according to the 2026 Index.

Technology Risk: October Update

Stable at 6

The garment industry needs to adopt new technologies including AI to remain competitive, according to the country’s Minister of Industry, Science, Technology and Innovation. Speaking in August, Hem Vandy warned that the sector’s reliance on low cost labour leaves it vulnerable as smart manufacturing takes hold off the industry globally.

Technology  Risk - Context

The Global Innovation Index (GII), from the World Intellectual Property Organization, is an important index used by countries and multinational companies to assess innovation ecosystems and aid in policymaking and investment decisions. Cambodia ranked 100th out of 133 countries in the 2025 GII, up from 110th place in 2020. Cambodia ranked 15th among the 37 Lower middle-income group economies. The country ranked 15th among the 17 economies in Southeast Asia, East Asia, and Oceania. Mobile internet coverage extends to over 90% of the population, with a strong presence in urban areas. 

Cambodia ranked 49th in the world for mobile speeds and 107th for fixed broadband speeds during July 2026, according to Ookla Speedtest Intelligence, a significant improvement in the previous year’s data. The country has made significant progress in the areas of telecommunications, information technology, e-commerce, digital government, tech startups and new technology in recent years. Businesses in Cambodia are increasingly adopting new technologies, such as cloud computing, artificial intelligence (AI) and blockchain. The adoption of technology is facilitated by Cambodia’s young and tech-savvy population: 60% of the population is under 30 years old. Cambodia launched 5G services on January 1, 2026, with major operators, via Cellcard, Metfone, and Smart. As of early 2026, 5G is primarily available in Phnom Penh and key provinces, with over 1,500 active antenna stations and rapid expansion efforts targeting urban and provincial areas. Meanwhile, operators keep expanding 4G coverage to provide more extensive and reliable connectivity across the country.

Government policies

The government has recognized the importance of internet speed in its development agenda, as outlined in the Cambodia Digital Economy and Society Policy Framework 2021–2035. The framework aims to build a digital economy that will become both a new economic growth driver and an ecosystem that contributes to increasing productivity and economic efficiency and improving the well-being of the people of Cambodia’s digital society.

Cambodia is also moving to accelerate the growth of its startup ecosystem with the finalisation of the National Strategy on Startup Development 2026-2030, a policy initiative aimed at transforming the country into a regional hub for innovation, digital entrepreneurship, and technology-driven economic growth.

Infrastructure

Cambodia is implementing a US$36.6 billion to US$37.7 billion comprehensive intermodal transport and logistics master plan for 2023–2033, driven by increased public spending and foreign investment. Much of the development is dependent on Chinese investment. China was the key investor in the Techo International Airport, which opened in 2025, and other initiatives dependent on Chinese funds include the US$1.7 billion Funan Techo Canal, the US$2 billion Phnom Penh-Sihanoukville Expressway, and numerous highways and bridges. Beyond the aforementioned strategic infrastructure projects, China is also heavily involved in developing energy-generation projects in Cambodia, focusing on both traditional and renewable energy sources.

Education and skilled staff

The country recorded strong improvements in mathematics, science and reading in the Programme for International Student Assessment (PISA) 2025, produced by the OECD. Cambodia achieved the largest mathematics gain among 46 countries and economies with comparable data. Despite the gains, many students remain below the basic proficiency benchmark of the assessment.

The OECD Director for Education and Skills Andreas Schleicher said “We’re not talking about statistical noise here. We’re talking about a school system that is on the move.” Overall, however, Cambodia remains well below OECD averages. Students scored 366 in mathematics, 382 in science and 347 in reading, compared with OECD averages of 463, 482 and 461 respectively.

Environmental, Social and Governance (ESG): October Update

Stable at 6

In June 2026, Cambodia secured a US$115 million financing package from the World Bank to strengthen its electricity grid, improve energy efficiency and support its shift toward cleaner energy as rising power demand puts increasing pressure on the country's electricity system. The package includes a US$110 million loan and a US$5 million grant to help Cambodia expand reliable electricity supplies while reducing carbon emissions and keeping power affordable for households and businesses.

ESG - Context

The United Nations’ Sustainable Development Goals (SDGs) are recognized as a beneficial framework for responsible investment. The Sustainable Development Report from Cambridge University Press assesses the progress of UN Member States on the SDGs. It provides a useful means of ranking Southeast Asian countries on their ESG progress.

Cambodia is ranked 108 out of 169 in the 2026 report, with a score of 65.3.

Environment – Cambodia ranks as one of the 12 most vulnerable countries to climate change across the globe. The country’s National Council for Sustainable Development cites several areas of concern. These include agriculture, where the impact of climate change is particularly significant because a large portion of the population is involved in smallholding and subsistence farming livelihoods, and agriculture constitutes the backbone of the economy. Agricultural practices in Cambodia are mostly rainfed systems which increase their vulnerability to a changing climate. It has witnessed severe floods and droughts that have caused a significant loss in agricultural productivity in recent years. The Council adds that outbreaks of diseases such as malaria and dengue fever linked to climate change, will pose significant challenges to Cambodia. Similarly, sanitation and pollution of freshwater, such as during flood events are likely to increase incidences of cholera and other water-borne diseases.

Social – According to the US State Department’s latest Investment Climate Statement, the country’s amended Trade Union Law of 2020 has not fully addressed concerns about curbs on freedom of association. In addition, Cambodia has only implemented and enforced a minimum wage in the export-oriented garment, footwear, and travel goods sector, which was raised to $208 per month in January 2026. Payoneer, a global payments business, says that navigating labour laws in Cambodia can be complex, especially for growing businesses. For instance, says Payoneer, determining the percentage of employer and employee contributions across different social security schemes can often be complex and confusing for employers, especially when navigating multiple requirements and varying contribution rates under local regulations.

Governance – ESG principles have only recently appeared on the corporate agenda in Cambodia. Corporate governance in Cambodia is anchored by the 2005 Law on Commercial Enterprises (LCE) and overseen by regulators like the Securities and Exchange Regulator of Cambodia (SERC) to promote transparency, accountability, and investor protection. An article in the Khmer Times, published in August 2026, pointed out that the country’s economic backbone consists of resource-constrained SMEs that face severe hurdles, chiefly the upfront capital required for green energy and waste restructuring.

Latest Economic Data

f = forecasts
Source: IMF and Worldbox Business Intelligence estimates