The Potential Cascading Impacts of Climate Change in Cambodia

This paper develops a “plausible worst-case” scenario for Cambodia to illustrate how a severe, 1-in-10-year flood could trigger cascading impacts, including widespread disease outbreaks and financial instability. The analysis shifts from forecasting to risk management, focusing on the economic consequences at each stage of this disaster chain. As climate change increases the frequency and severity of extreme weather events, Cambodia’s vulnerabilities are likely to intensify, with severe floods leading to disruptions in health care, declines in labor productivity, and risks to financial stability. Although Cambodia’s current financial position provides some resilience, the risk of financial contagion remains, especially due to the growing sovereign-bank nexus. The paper highlights the importance of integrating climate risks into Cambodia’s broader risk management strategies and suggests preemptive interventions, such as improving flood forecasting, health care infrastructure, and exploring disaster risk finance instruments. These measures could help mitigate the cascading impacts of climate-induced disasters and build long-term resilience. The paper concludes that a shift from reactive crisis management to proactive preparedness and adaptation will be crucial for Cambodia’s ability to manage future climate risks and ensure economic and social stability.