Stephen Higgins

Interview: Stephen Higgins on Cambodia’s Economic Crossroads — Cautious Optimism with Global Storm Clouds Ahead

May 2025

Stephen Higgins, Managing Partner at Mekong Strategic Capital

As Cambodia navigates a post-pandemic recovery amidst global uncertainty, one of the country’s most influential economic voices, Stephen Higgins, Managing Partner at Mekong Strategic Capital, offers a sobering yet cautiously optimistic perspective on where the Kingdom stands — and where it might be heading in the year ahead.

We sat down with Higgins to get his take on the current economic climate, the challenges ahead, and what he sees as the key drivers of resilience and recovery.

Q: Looking back, how would you describe Cambodia’s economic performance in 2023 and 2024?

Higgins: The official line was 5% GDP growth, but we’re skeptical. When you dig into the numbers, about 2.1% of that was from non-garment manufacturing, mainly solar panel exports. That doesn’t pass the sniff test — Cambodia doesn’t have the infrastructure to justify that scale of solar panel production. If you strip that out, you’re left with something close to economic stagnation.

Q: What indicators give you cause for concern?

Higgins: Garment exports — a pillar of the economy — were down. Tax revenues fell significantly, particularly VAT and excise collections, which typically signal consumer activity. Vehicle imports, which are a reliable proxy for household confidence, dropped 44%. These aren’t the signs of a thriving economy.

Q: So, has 2024 brought a turnaround?

Higgins: Yes, encouragingly so. If you exclude solar panels, exports are up 25% year-on-year. That’s even better than what we’re seeing in Vietnam. Garment exports have rebounded, consumer spending is picking up — evidenced by stronger VAT collections and a 28% rise in vehicle imports. It’s the kind of recovery we’d hoped to see earlier.

Q: And tourism? Is it bouncing back too?

Higgins: To an extent. International arrivals are up 29% compared to last year, but still down 47% from pre-COVID levels. Cambodia continues to underperform in this area. The product offering is good, but the brand perception isn’t where it needs to be. That hurts repeat visitation and long-haul tourist numbers.

Q: Let’s turn to the financial sector. Where does it stand in mid-2024?

Higgins: Liquidity has returned in a big way. Customer deposits are up 20% in just six months. But that hasn’t translated into credit growth. Banks are cautious, and so are borrowers. Part of that is due to uncertainty in incomes and higher interest rates.

Q: What about non-performing loans?

Higgins: That’s still a concern. About 7.5% of borrowers are over 30 days in arrears. That number hasn’t shifted much yet. There’s potential for improvement as rates come down and incomes stabilize, but we’re not out of the woods.

Q: The real estate sector seems like a pain point. What’s your view?

Higgins: It’s oversupplied and soft. Property prices are falling, but not fast enough to clear the market. Restructured loans in the sector account for 14% of total lending, which is significant. There’s a lot of deadweight. Eventually, to resolve the backlog, we’ll need to see widespread sales — and that will likely push prices down further.

Q: What’s your overall outlook for the next 12 months?

Higgins: Cautious optimism. The worst is behind us in terms of domestic headwinds. But global conditions are softening. The IMF just revised Cambodia’s 2025 forecast down to 4.0% from 5.8%. As a small, open, trade-exposed economy, Cambodia is highly sensitive to global trends — and the external picture isn’t great.

Q: Any specific risks to watch?

Higgins: A slowdown in the U.S. or Chinese markets could have an outsized impact. And if global interest rates remain elevated, that will constrain investment flows. Cambodia’s current recovery is partly driven by consumption and exports — if either falters, we’ll feel it quickly.

Q: What sectors offer the best prospects for growth?

Higgins: Manufacturing still has potential, particularly if Cambodia can move up the value chain. Agri-processing and electronics could be strategic bets. Tourism has a long way to go and should bounce back more fully if connectivity and promotion improve.

Q: And the financial sector?

Higgins: There’s an opportunity to strengthen capital markets. Cambodia needs alternative financing channels beyond bank lending. If the securities and bond markets can be deepened, that will attract investment and provide much-needed diversification.

Q: What should policymakers focus on to sustain recovery?

Higgins: Infrastructure investment is essential. That includes energy, logistics, and digital infrastructure. The new Phnom Penh airport is a good example — it’ll be a game-changer if executed well.

Second, the financial sector needs a long-term clean-up. That means tackling bad debt and ensuring prudent lending practices. Third, trade diversification — Cambodia is still heavily reliant on a few markets and product categories. We need a more resilient export base.

Q: If you had to sum up where Cambodia is today, what would you say?

Higgins: We’re at a turning point. The economy has shown resilience, but it’s not yet robust. There’s momentum — but it’s fragile. The next 12 months are a window of opportunity to lay the foundations for stronger, more inclusive growth. That requires bold decisions, not just cautious management.

About Stephen Higgins

Stephen Higgins is a founding partner of Mekong Strategic Capital, one of Cambodia’s leading advisory and investment firms. An influential voice on economic and financial sector issues, Higgins previously served as CEO of ANZ Royal Bank in Cambodia and has worked extensively across Southeast Asia. His regular insights are widely followed by investors, policymakers, and business leaders across the region.

Editor’s Note

For more commentary from Stephen Higgins and Mekong Strategic Capital, visit mekongstrategic.com or follow their latest reports and appearances on regional economic developments.