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Logo of Phnom Penh Post newspaper Phnom Penh Post - Food prices in capital climb 1.7pc in second quarter

Food prices in capital climb 1.7pc in second quarter

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090702_13.jpg

Trade Promotion Department figures indicate a probable return to inflation compared with the first quarter, in which prices were down nearly 5pc.

Photo by: STEVE FINCH

Vendors sell their wares at Phnom Penh's Central Market. Food prices increased in price by 1.7 percent in the second quarter compared with the first three months of 2009. 

NEW government figures show quarterly food inflation hit 1.7 percent in the three months to Tuesday compared with the previous quarter, during which Cambodia saw deflation of nearly 5 percent.

The food prices - released by the Trade Promotions Department, a division of the Ministry of Commerce - were aggregated for 36 products, from rice to fruit to smoked fish, sold in Phnom Penh's markets.

As the figures were released, the government's main statistics body agreed that a rise in inflation was likely for June. The National Institute of Statistics (NIS), which releases its monthly inflation figures next week and whose calculations are based on a much broader range of goods including fuel, said its June figures would likely show inflation picking up.

"Compared to previous months we will see a little increase [in inflation in June]," said NIS director Sorn Siphan. However, he would not be drawn on a final figure.

Though year-on-year inflation has remained negative in 2009, Sorn Siphan expects that will change later this year. He said he believes June will show a smaller contraction than the minus-5.7-percent annualised rate recorded in May.

"And in the next two or three months [annualised inflation] may be positive," he said.

Meanwhile, a kilogram of grade-one rice showed a small increase of less than 1 percent from 2,460 riels (US$0.59) to 2,480 riels in the second quarter. Paddy was up 1.85 percent.

Among the largest climbers were fruit, with tomatoes up 58 percent, bananas up 12 percent, oranges up 8 percent, and pineapples up around 4 percent.

Yaing Sang Koma, president of the Cambodian Centre for the Study and Development of Agriculture (CEDAC), an agricultural NGO, pointed out that the cyclical nature of agricultural production affects inflation.

"Generally [inflation] rises in the second quarter," he said on Wednesday. "In the first quarter, various crops are harvested - there is a glut of agricultural products, which pulls down prices."

Yaing Sang Koma said output normally drops in the second quarter, and added that the modest increases in food prices had hardly affected farmers compared to more violent fluctuations in the recent past.

The latest data mark a relative stabilisation in prices after inflation hit a peak in July and August last year before falling again as the economic crisis constrained demand at the end of 2008. That trend extended into the start of 2009, with year-on-year inflation rates negative so far this year.

NIS figures showed that the consumer price index (CPI) for May this year was 1 percent higher than in April. However, prices were still 5.7 percent lower than in May 2008.

The London-based Economist Intelligence Unit predicted in its June outlook for the Kingdom that inflation would "slow sharply" this year. That slowdown comes off government data showing 19.7 percent CPI inflation for 2008, the highest since records began in the mid-1990s.

"Domestic prices for rice and petrol have fallen sharply since mid-2008, and we forecast that they will continue to do so in 2009, in line with global trends," the EIU noted.

Oil inflation threat

One concern for the government remains the increase in global oil prices, leading to a rise in prices at the pumps. Petrol prices have risen more than a quarter this year, and diesel has gone up 15 percent.

On Wednesday some petrol stations were selling a litre of petrol for 4,000 riels, marking the first time prices have broken the 4,000-riels mark this year despite a meeting held between Minister of Economy and Finance Keat Chhon and key petrol retailers this week in which he asked them not to boost prices.

However, retailers may not have much choice. A barrel of benchmark Brent Crude oil passed the $70 mark on Wednesday in Singapore, from which most of Cambodia's oil is imported.

Cambodia remains susceptible to fluctuations in oil prices because it imports all its oil products and maintains just three months' stock.

ADDITIONAL REPORTING BY NGUON SOVAN

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