PHNOM PENH, Oct. 6 (Xinhua) -- The World Bank on Tuesday downgraded Cambodia's 2026 economic growth forecast to 3.5 percent, down from 5.3 percent last year, citing a sharp slump in international tourist arrivals and surging fuel costs.

"In Cambodia, domestic demand weakened in 2026 as international arrivals and remittances fell, while higher oil prices squeezed household incomes," the bank said in its latest East Asia and Pacific Economic Update.

The report noted that while a real estate correction and tighter credit conditions weighed heavily on investment, overall growth was partially cushioned by rising goods exports.

The severe impact of energy costs is clearly reflected at local pumps. According to the Ministry of Commerce, the retail price of regular gasoline has risen to 5,150 riels (about 1.27 U.S. dollars) per liter on Tuesday, representing a 33.7 percent increase compared to levels before the Middle East conflict. Meanwhile, diesel prices have climbed to 5,650 riels (about 1.39 U.S. dollars) per liter, marking a 46.7 percent spike.

Over the medium term, Cambodia's economic growth is projected to rebound to 4 percent in 2027 and 5 percent in 2028, the report said.

This recovery is expected to be driven by stabilizing energy prices, a revival in tourism, and the successful economic reintegration of returning migrant workers. However, the report cautioned that the El Nino weather phenomenon could temper the anticipated agricultural recovery in 2027.

The Southeast Asian nation's economy remains heavily reliant on tourism, agriculture, real estate, construction, and the export of garments, textiles, footwear, and travel goods.

According to government data, exports of garments, textiles, footwear, and travel products rose 7.2 percent year-on-year to 11.76 billion U.S. dollars during the first eight months of 2026. Conversely, international tourist arrivals plunged 44 percent to 2.25 million over the same period, severely impacted by online scam issues, friction along the Cambodia-Thailand border, and ongoing geopolitical conflicts in the Middle East. ■

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