After contracting by 3.1 percent in 2020, Cambodia’s economy has gradually recovered.

The recovery is, however, uneven, partial, and volatile in part due to the re-introduction of a domestic lockdown, triggered by recent flare-ups of coronavirus infections. Like many countries in the region, Cambodia has been hit hard by global demand shock and coronavirus-related shutdowns which have had predictably uneven economic impacts across sectors. The agriculture sector has been relatively resilient in the face of the coronavirus shock. In addition, it has been boosted by increased investment, thanks to good prospects of the newly signed Cambodia-China Free Trade Agreement (CCFTA) and Regional Comprehensive Economic Partnership (RCEP).

The manufacturing sector sharply contracted last year, but appears to have gradually recovered since, as it has adapted to changing external conditions.

The easing of the traditional manufacturing industries, namely garment, footwear, and travel (GFT) goods has been partly offset by the expansion of the newly emerging manufacturing (electrical, electronic and vehicle parts including bicycles) and agroprocessing industries. Parts of the services sector such as accommodation, restaurants and transport continue to be hit hard by slowdown in domestic and international tourism, while wholesale and retail trade has managed to slowly recover, supported by a gradual revival in domestic economic activity.

The government has the ability to provide further fiscal and monetary support as the pandemic intensifies. In 2021, the budget for COVID-19-related relief and recovery intervention is US$719 million, compared to US$823 million in 2020. The central bank has extended its accommodative monetary policy. The National Bank of Cambodia decided in its Monetary Policy Committee meeting held in February 2021 to: (i) continue to maintain exchange rate stability via its exchange market intervention; (ii) provide riel liquidity via Liquidity-Providing Collateralized Operation facilities according to riel exchange rate and liquidity conditions; and (iii) maintain the reserve requirement ratio at 7 percent for both riel and U.S. dollar deposits and borrowings until the end of the first semester of 2021, and as necessary. Subsequently, in May 2021, the central bank issued its third round monetary easing measures which include, among other things, (i) a decision to maintain a reserve requirement ratio at 7 percent for both riel and U.S. dollar deposits and borrowings until further notice; and (ii) a permission to allow the banking and microfinance sectors to continue to restructure loans until the end of 2021. The COVID-19 vaccination program began in February 2021 and has quickly accelerated. A national COVID-19 vaccination strategic plan was introduced in May 2021.

Goods exports have recovered. Merchandise (excluding gold) exports grew at 12.2 percent in the first four months of 2021. Despite rising shipping costs, exports of GFT products, which bottomed out in January 2021, contracting by 13.2 percent y/y, have recovered since, growing at 10.2 percent and 27.8 percent in March and April 2021, respectively. In the first four months of 2021, exports of bicycles and combined vehicle, electrical, and electronic parts grew at 32.3 percent and 16.4 percent, respectively. Exports of garment and textile products no longer accounted for the majority of merchandise exports. The share of garment exports in total goods (excluding gold) exports declined to 45.6 percent in the first four months of 2021, down from 52.2% in 2020 (and 57.6% in 2019). Although a small segment of the housing market–low and affordable residential property–remained resilient, the downturn in the construction and real estate sector continued.

In the first four months of 2021, approved construction permit value plummeted, contracting by 41.5 percent, while cement imports contracted by 19.2 percent. However, imports of steel and cooling equipment such as air conditioners grew by 5.4 percent and 24.1 percent, respectively.