World Bank cuts Cambodia's 2026 growth forecast to 3.5 percent

The World Bank on Tuesday cut its forecast for Cambodia's growth in 2026 to 3.5 percent, from 5.3 percent last year. The new figure is in the East Asia and Pacific Economic Update. The bank said domestic demand weakened as international tourist arrivals and remittances fell, and as higher oil prices squeezed household incomes. A property correction and tighter credit weighed on investment. Goods exports rose, and that rise is what kept the forecast from falling further.

The oil number is local and specific. Cambodia's commerce ministry put regular gasoline at 5,150 riels a litre on Tuesday, about 1.27 dollars, which is 33.7 percent above the price before the Middle East war. Diesel was 5,650 riels, about 1.39 dollars, up 46.7 percent. Those are pump prices in riels, not a regional index. A diesel rise of nearly half changes the cost of a fishing trip, a bus route and a generator in a guesthouse that has lost its foreign guests.

Tourists and remittances, not a factory story

Cambodia's pre-war growth leaned on garments, tourism and money sent home. The bank's sentence this week puts the damage on the second and third, and says goods exports partly offset them. That split matters. A garment order can survive a fuel spike if the buyer still wants the shirt. A hotel in Siem Reap cannot survive an empty arrival hall. Remittances falling at the same time means families who used overseas wages to cover the fuel bill have less of both.

The medium-term line in the same report is a slow climb back: 4 percent in 2027 and 5 percent in 2028. That path assumes the fuel shock fades and visitors return. It does not assume a quick repair. A country that grew 5.3 percent last year and is now pencilled in at 3.5 percent has lost a large share of one year's expansion, concentrated in the sectors that employ guides, drivers and the families who receive money from abroad.

Where the fuel shock comes from

The bank ties the squeeze to higher oil prices, and the commerce ministry's comparison is explicitly to the period before the Middle East conflict. The Strait of Hormuz has been a closed or contested passage for months in this war, and G7 states have been releasing stocks to cap the price. Cambodia does not pump oil. It buys it. A 46.7 percent diesel rise is the local form of a war whose fighting is somewhere else.

India, in a separate World Bank note out the same day, had its growth forecast raised. Cambodia's was cut. The two updates are not a contradiction. One economy is large, domestic and less dependent on a single tourist season. The other is small and priced in imported fuel. Reading them together is the useful point of Tuesday's release: the same oil shock does not land evenly across the region the bank covers.

The figure to check next quarter

The 3.5 percent is a forecast, not a result. The pump prices are a result. If arrivals keep falling and diesel stays near 5,650 riels, the 2027 rebound to 4 percent starts to look like a hope rather than a path. If fuel eases and the export cushion holds, the bank's medium-term line is the one to keep. The next East Asia update will show which of those happened. Tuesday's paper already shows the mechanism: fewer visitors, thinner remittances, a dearer litre.