The Covid-19 pandemic brought widespread economic disruption across the globe, and Cambodia was no exception. 

Known for its bustling garment factories and vibrant tourism industry, the country faced significant challenges during the pandemic. 

“The garment, tourism and construction sectors, in particular, were hit hardest, leading to unprecedented job losses and economic instability,” according to an Asian Development Bank (ADB) report in June 2020. 

However, as the world recovers from the pandemic, the country’s key industries have been slowly bouncing back, with garment manufacturing and tourism showing signs of recovery despite ongoing challenges.

During the height of the pandemic, Cambodia faced a steep rise in unemployment. ADB and the UN Development Programme (UNDP) reported that between 390,000 and 570,000 jobs were lost across multiple sectors. 

“This included significant job suspensions, particularly in the garment industry, where over 323,000 workers experienced partial or full layoffs,” said the ADB report. 

The pandemic was a severe blow to the Cambodian economy, which relies heavily on tourism and the export of garments for foreign exchange and employment.

In 2020, the country saw its unemployment rate surge from 0.7% in 2019 to between 3.2% and 4.4%, with major job losses in manufacturing, construction, hotels, restaurants and transportation. 

“This spike in unemployment had far-reaching effects. A substantial portion of the population fell into poverty, with estimates suggesting that up to 1.1 million workers slipped into moderate poverty, and 205,000 workers fell into extreme poverty,” according to the report. 

The situation was dire, particularly for those reliant on industries such as garment manufacturing, which saw diminished demand from key markets like the US and EU.

Recovery in the garment industry

The garment sector, which is a cornerstone of the country’s economy, employing a large portion of its workforce, suffered a significant blow during the pandemic. 

Many factories had to suspend operations due to a drop in international demand, as lockdowns and economic downturns in key markets caused orders to plummet.

By 2021, however, recovery efforts were underway. Government social protection programmes helped cushion the blow for laid-off workers. 

These programmes provided financial assistance to garment workers, with the government and employers offering employees a $70 subsidy per month during the crisis. 

This support was instrumental in lowering the unemployment rate to 2.9% by the end of 2021, a significant improvement from its peak in 2020.

The UN is working with the Ministry of Education, Youth and Sport, the private sector, garment factories and the Textile, Apparel, Footwear and Travel Goods Association in Cambodia (TAFTAC) to provide tailored upskilling courses for female garment workers, using education as a tool to enhance their resilience to economic shocks. 

The courses aim not only to improve the basic literacy and numeracy skills of garment workers but also to enhance their financial literacy and knowledge of reproductive health, nutrition, workers’ rights, and labour laws. 

“The Factory Literacy Programme (FLP) has continued through the Covid-19 pandemic and has served over 2000 workers across 12 provinces through 25 partner factories. The programme will expand and continue for another three years,” according to a June 2021 news release from the UN in Cambodia. 

Katta Orn, spokesman for the Ministry of Labour and Vocational Training, said that after the pandemic, working conditions have improved and the number of factories has increased.

“The layoffs from the Covid-19 crisis ended in 2022, and from the Russia-Ukraine crisis by the end of 2023. For these layoffs, workers received $70 per month, with employers paying $30 and the government providing $40,” he told The Post.

While the garment industry has resumed production and many factories have reopened, recovery has been uneven. 

International demand, particularly from the US and Europe, remains inconsistent, slowing the rehiring process. 

According to the World Bank, the garment industry continued to struggle throughout 2023, with export demand declining. 

However, in 2024, the country’s garment exports picked up slightly, accounting for 16.9% of total exports in the first nine months of the year.

Orn reported that the number of factories has risen to 44,441, of which 1,539 are garment factories – up from 1,326 before Covid-19. These garment factories currently employ 917,069 workers, compared to 840,000 in 2020 before the pandemic impacted the industry.

“Today, these factories operate normally and in compliance with proper labour laws,” he added.

Revival of tourism sector

If the garment industry’s recovery has been slow, the country’s tourism sector tells a slightly brighter story. 

The sector, which contributes 15-20% to Cambodia’s GDP, was devastated during the pandemic, with international arrivals plummeting as countries-imposed travel bans and restrictions. 

Hotels, restaurants and other tourism-related businesses were forced to shut down or drastically scale back operations, leading to widespread job losses.

The revival of the sector began in earnest in 2023 as travel restrictions were lifted, and international demand started to return. 

According to the Ministry of Tourism, international arrivals surged by 32% in the first half of 2024 compared to the previous year, signaling a strong recovery. 

“Cambodia received 548,828 international visitors during [August 2024], marking an 18.1% increase compared to August 2023,” according to the ministry’s tourism report released in September 2024. 

The latest report noted that from January to August 2024 the total number of international arrivals reached 4.29 million, a 22.5% year-on-year increase. 

Siem Reap province, home to the iconic Angkor Wat temple complex, saw a substantial rise in visitors, especially following the opening of the Siem Reap-Angkor International Airport (SAI) in late 2023. 

By the airport’s one-year anniversary, it had already handled over 1.3 million passengers and facilitated nearly 15,000 flights, according to the State Secretariat of Civil Aviation (SSCA).

This new infrastructure, alongside improvements in transportation and accommodation options, has made it easier for tourists to explore beyond traditional attractions.

ASEAN member states remained the largest source of tourists, with 2.72 million visiting Cambodia in the first eight months of 2024. 

“Tourists from Thailand and Vietnam led the influx, with 1.34 million and 868,445 visitors, respectively. Both countries recorded double-digit growth compared to 2023,” the report added. 

Northeast Asia, including China, South Korea and Japan, also saw significant increases in tourist numbers to Cambodia. 

China sent 538,834 travellers to Cambodia, representing a 47.7% increase compared to 2023.

The “Kingdom of Wonder” marketing campaign, alongside visa policy adjustments, helped promote the country as a safe and attractive destination.

In addition to heritage tourism, Cambodia is increasingly promoting ecotourism as a way to diversify its offerings. 

Ecotourism appeals to environmentally conscious travellers and focuses on the country’s natural beauty, such as the Cardamom Mountains and Tonle Sap Lake. 

The sector has experienced growth, providing a new avenue for sustainable tourism development.

The post-pandemic struggle

Cambodia’s economic growth in 2024 and 2025 is expected to be driven by a recovery in the garment sector, spurred by rising demand from key developed markets. 

The non-garment manufacturing sector is anticipated to maintain its upward trajectory, bolstered by consistent inflows of foreign direct investment (FDI). 

Consumer price index (CPI) inflation, which peaked in 2022, averaged 2.1% in 2023 before experiencing slight deflation in early 2024. 

The volatility in CPI inflation is largely influenced by shifts in food and oil prices, which are sensitive to global economic trends. 

“Gradually approaching pre-pandemic levels, CPI inflation is expected to rise to 2.2% in 2024 and 2.3% in 2025 due to higher domestic demand and a possible rebound in energy prices,” according to AMRO’s Annual Consultation Report on Cambodia.  

Before the pandemic, the country experienced a steady increase in international tourist arrivals. 

“By 2019, the country welcomed over 6.6 million international tourists, a 6.6% rise from the previous year,” according to the Tourism Statistics report. 

Tourism contributed significantly to the country’s economy, accounting for 12.1% of its GDP that year. 

However, the report showed that the pandemic caused a drastic reduction in visitor numbers. In 2020, international tourist arrivals dropped by over 80%, with only 1.3 million tourists, and further declined to just 196,000 in 2021. 

This severe impact on the sector mirrored global travel restrictions and public health concerns.

Post-pandemic recovery has been rapid. In 2023, Cambodia welcomed over 5.4 million international tourists, a remarkable 139.5% increase from 2022. 

The government set up the Cambodia Tourism Marketing and Promotion Board (CTB) in June 2024 led by tourism ministry as a public-private partnership aimed at boosting the country’s global appeal. 

The CTB includes representatives from eight public institutions and seven private sector stakeholders, ensuring a comprehensive approach to promoting the country’s tourism.

The board’s key objectives are to address challenges in the sector and work towards sustainable development goals (SDGs) by fostering collaboration between the private sector and the government. 

It plays a crucial role in aligning Cambodia’s tourism strategy with global trends, focusing on cultural heritage, natural beauty and enhancing the country’s competitiveness as a top travel destination.

Major contributors to this growth are tourists from neighbouring countries like Thailand, Vietnam and China.

The country is expected to continue this upward trend, with projections indicating there will be seven million international visitors in 2026, Prime Minister Hun Manet said during World Tourism Day 2024.

The recovery efforts have been supported by government initiatives such as infrastructure development, tax incentives for tourism operators and a focus on promoting the Kingdom as a safe destination.

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