Lower petrol prices, increase in agricultural production contributed to lower inflation, with consumer price index down by two percentage points

Photo by: Sovann Philong

Meat vendors in the Central Market. Cambodia’s sky-high inflation has come down, according to government data.

13.4%

Cambodia's inflation rate

Lower fuel prices and a strong harvest are leading to lower inflation in Cambodia. The government expects inflation to fall to nine percent as lower crude costs translate into savings at the pump.

Cambodia's inflation rate dropped to 13.46 percent in December 2008, down more than two percentage points compared with November's 15.74 percent, according to a government report released Tuesday.

Minister of Planning Chhay Than told the Post that falling petrol prices, a strong harvest and better fish catches were the main factors behind the drop.

"We think that inflation will decline further this January because the local food supply has been increasing," he said.

The major group index for food, beverages and tobacco fell 2.06 percent in December, and the index for the food sub-group decreased 2.23 percent on lower rice, pork, chicken, beef, fresh fish and leafy vegetable prices, according to the monthly consumer price index report by the National Institute of Statistics (NIS), a division of the Planning Ministry.

Price increases were recorded for cigarettes, which rose 3.16 percent; clothing and footwear, up 0.09 percent; and housing and utilities, up 0.57 percent, the report said.

The report is welcome news for a country that faced more than 30 percent inflation in the middle of 2008.

"Inflation is no longer a big problem in Cambodia, and lower prices will begin to benefit producers and consumers," said Chan Sophal, president of the Cambodia Economic Association.

He  said that a strong harvest  had flooded the markets with inexpensive products, which helped to drive down prices.

Lower petrol prices had been the major factor behind the price drops, he said.

"An inflation rate of over 10 percent is high in terms of the macroeconomy, but it is not a problem in our country because we are [commodities] producers," said Chan Sophal.

However, he said that a healthy rate of inflation is needed to keep the public spending.

More drops expected

Since October, Hang Chuon Naron, secretary general of the Ministry of Economy and Finance, predicted that inflation will drop to nine percent in early 2009 if crude oil stays below US$70 per barrel.

International crude is currently at $37.22 per barrel.

Yim Sovann, Sam Rainsy Party lawmaker, said falling growth in national income means that inflation is still eating into wages and savings.

"It can be good for the standard of living if inflation is double digits and the economic growth rate is higher, but if economic growth is five or six percent and the inflation rate is 13 percent, people  will be worse off," said Yim Sovann.

"Inflation should be below the economic growth rate," he added.

The consumer price index fell 1.96 percent in the fourth quarter of 2008, on the back of a 1.78 percent increase in the third quarter. For the year, the index increased 19.69 percent in 2008, up from a 5.85 percent increase in 2007 and 4.71 percent in 2006, according to the December price index report.

A separate commodities report by the Ministry of Commerce's Trade Promotion Department recorded lower prices almost across the board.

Steel prices were down the most at 89.56 percent, according to the January 6 report.

Some agricultural goods increased sharply, according to  the report.

Bananas were up 30 percent, pineapples 25 percent, oranges 15 percent and cucumbers 14 percent.

Global inflation has been dropping, largely due to falling oil prices and a slower economy.