World Bank Projects Cambodia Inflation Reaches 7.5 This Year

By Sok Lak
The consumer price inflation rose 6.7 percent in September 2011 from a year earlier with a nearly half of the increase attributable to food alone and the inflation rate fell slightly from 7.1 June 2011, which is projected to reach 7.5 percent by the end of 2011, according to a report from World Bank East And Pacific Economic Update 2011 released on November 22nd, Hout Chea, an Economist of the World Bank in Cambodia, said that the projection of Cambodia’s inflation this year will be slightly higher than last year as it is projected to reach 7.5 percent this year. “As goods prices represent 50 percent of the whole inflation package in Cambodia, the goods prices, especially for rice, will remain high, and it will cause Cambodia’s inflation level to raise high as well.”
Recently, the price of rice has started to increase in Cambodia’s market and it will increase more in the second half of 2011, an event marked by flood interruption and purchase competition from neighboring countries.
Moreover, the price of rice in the international market also is up as it increased 26 percent in September 2011 when comparing to the same period last year. These factors are the main cause of the rising inflation of this year,” he explained.
“Meanwhile, this rate is not yet high enough to create fear of neighboring countries such as Vietnam and Thailand. By the way, Cambodia also needs to pay attention to its particular needs as rates are higher than the expectation of the government that only made an estimate around 5 percent,” he stressed. “The inflation rate is expected to go down in the next year as the rice price at market is stable and flood damage effects will by then have been mitigated. In addition, the rice market in Thailand, which is known as one of the top global rice markets, will stabilize prices,” Huot mentioned.
However, Deputy Prime Minister Keat Chhon, Minister of Ministry of Economy and Finance, expects that inflation will go down to 6.5 percent at the end of this year while inflation currently remains at 7.1 percent in July and August. He said that these months were the season when inflation used to be high at the level of export food groups as well as goods at the consumer level. According to the World Bank, the Cambodian inflation rate reached a very high level in 2008 as it crested at 12.5 and then went down to 5.3 percent in 2009 and then to 3.1 percent in 2010 when it was expected that inflation would go down from 7.5 in 2010 to 5 percent in 2012.
The World Bank also expects that Cambodian economic growth will be at 6 per cent in 2011. Cambodia continued its strong recovery from the 2009 crisis and the growth momentum is expected to continue. The recent floods and the slowdown in the EU and US economies have slowed growth over the second half of the year. The economic growth momentum is expected to further increase to 6.5 percent annually for the next two years on the assumption that the international environment does not deteriorate. The 2011 growth is being driven by strong exchange of goods and services, private investment, and by a bolstering of a solid macroeconomic position.

Source: The Southeast Asia Weekly, Nov 27-Dec 3, 2011, Vol. 5, Issue 48, Page 4


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