October 4, 2011

Kingdom’s inflation still rising


Inflation in Cambodia grew 6.4 per cent year-on-year in August, as the National Institute of Statistics said high food and fuel costs continued to weigh on the Kingdom. At the same time, the NIS reported a 0.2 per cent increase in the Consumer Price Index from July.

NIS data showed the main increases came from gasoline and food and non-alcoholic beverage products, which climbed 19.2 per cent and 7.7 per cent year-on-year, respectively. Meat prices alone increased 18.5 per cent, while cooking gas jumped 13.9 per cent. Housing, water, electricity and other fuels rose by 4 per cent, according to the NIS.

Reactions to the numbers were mixed, with some experts saying the sharp increases over 2010 were cause for concern. Still others claimed inflation in Cambodia was moderate compared to other countries in the region, especially Vietnam.

“It’s very concerning when [inflation] reaches this rate. The government should closely monitor it,” said Kang Chandararot, an economist with the Cambodia Institute for Development Study, yesterday.

He said high production costs are cutting into the profit margins of domestic businesses, even if global oil prices have shown some decline. He also noted that the Kingdom, which imports much of its goods and services, is often exposed to inflation through its trading partners. As other countries struggle with high prices, he said those costs are then passed on to Cambodia.

However, National Bank of Cambodia Director General and spokeswoman Ngoun Sokha said she was largely unconcerned with the 6.4-per cent year-on-year rise seen in August. She contrasted that number with the 7.1 per cent year-on-year jump seen in July, as well as the 20-plus per cent inflation rate presently seen in Vietnam.

“We hope that our situation will still be much better” than Vietnam, she said, adding that inflation in the Kingdom is often a seasonal phenomenon.

Ngoun Sokha said the government does carefully monitor market prices, and that it has taken measures to fight inflation. Lower import taxes on oil and the maintenance stable exchange rates were examples, she said.

“We see the exchange rate has increased more than 3 per cent compared to last year,” she said. “At the same time, we have also tried to stabilise the amount of money in circulation [by increasing banks’ reserve requirements] so it will have some impact on inflation.”

Both experts agreed that domestic importers needed to diversify the markets from which they bought products, though they diverged on whether the floods Cambodia has suffered over recent weeks would impact inflation.

While Kang Chandararot expected inflation would continue as flood waters hurt farmers’ crop yields, Ngoun Sokha said the planting season was not yet under way and therefore supply concerns were unwarranted at this time.

The Cambodian government has projected an inflation rate of about 6.5 per cent for 2011, the same figure projected by the International Monetary Fund by end of the year.

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