Cambodia's Financial Environment

The Highlights of the Week 2024/03/08 - 03/15

1.    Cambodia attracts $1.3 billion in FDI inflows
According to the Cambodia Development Council (CDC), Cambodia attracted $1.3 billion in investment in the first two months of this year. Chea Vuhty, Secretary General of the Cambodia Investment Board (CIB) at CDC, stated that China leads foreign direct investment (FDI) in Cambodia, accounting for approximately 39% of total investment capital. Lim Heng, Vice President of the Cambodian Chamber of Commerce, attributed the increase in FDI inflows to strong investor confidence. He noted that investors are optimistic about Cambodia's stability, peace, and free trade agreements, as well as the growth potential of Cambodian manufactured products. A CDC report from January showed that Cambodia attracted $4.92 billion in fixed asset investment in 2023, a 22% increase from the previous year's $4.03 billion. Investments from China accounted for about two-thirds of total investment capital, followed by investors from countries such as Singapore and Malaysia.
In the first two months of 2024, data indicates that inflows reached $1.3 billion, representing an increase of over 500% compared to the same period in 2023. This indicates that foreign investors are gradually recognizing Cambodia's future growth potential. Both the IMF and the Cambodian government have forecast GDP growth of over 6% this year, and the oversubscription of foreign direct investment is expected to further stimulate growth.

2.    International trade grows nearly 20% in Jan-Feb ’24
According to the General Department of Customs and Excise (GDCE) report, global economic recovery has gradually boosted Cambodia's international trade to surpass $8 billion in the first two months of 2024. From January to February, the total value of Cambodia's import and export activities with international trade partners reached $8.12 billion, an increase of 19.2% compared to the same period in 2023, which stood at $6.81 billion. Cambodia's export value amounted to $3.98 billion, a growth of 22.7%, while imports reached $4.13 billion, marking a 16.1% increase. The country's trade deficit during the same period was approximately $149.64 million, significantly lower than $313.33 million in the same period of 2023. Ky Sereyvath, an economist at the Royal Academy of Cambodia, stated that the simultaneous increase in imports and exports is positive as it indicates an increase in domestic demand for goods and exports.
According to GDCE data, Cambodia's international trade volume in 2023 amounted to $46.83 billion, a decrease of 1.9% compared to $47.71 billion in 2022. Cambodia's exports were valued at $22.65 billion, representing a growth of 1.8%, while imports totaled $24.18 billion, a decrease of 5%.
Local producers need to strengthen and expand domestic production to capitalize on global market opportunities, especially with the implementation of the Regional Comprehensive Economic Partnership (RCEP), which is enhancing the country's export market. According to GDCE, major trading partners include China, the United States, Vietnam, Thailand, Japan, Indonesia, and Canada. Sereyvath emphasized that the growth in import and export values is positive as it indicates an increase in both domestic demand for goods and exports. He cautioned that if only exports are growing, it may indicate stagnant or declining domestic demand, echoing previous research that emphasized the importance of understanding the structure of GDP growth and consumption versus savings when growth is primarily export-driven.