Logo of Phnom Penh Post newspaper Phnom Penh Post - Inflation rises to 6.5% in Sept

Inflation rises to 6.5% in Sept

Inflation rises to 6.5% in Sept

While the complaints about gas prices soaring to 4,450 riels per liter continue,

another crescendo of worries is coming from consumers about hikes in the cost of

food and other commodities.

"Now everything is so expensive! Before one kilo of pork is 10,000 riel but

now it's 16,000 riel," said Kang Ling Hua, who runs a small food shop O'Russey

market. She had just added 1,000 riel per meal on her previous price of $1 for a

plate of food, because she said inflation had eroded all of her profit.

"What is even more terrible is the price of gas," she said.

As businesspeople like Hua complained about "no profit," vulnerable salaried

workers were worrying about how to stretch their wages to cover their needs.

"It's getting hard for me now because the price of goods keeps on increasing

but not much my salary," said Chay Ty Hui, a worker who earns $80 per month.

According to statistics from the National Institute of Statistics, the inflation

rate in Cambodia this year has risen to 6.5% in September. At the end of 2006, it

was 2.8%.

Among the 200 items in Cambodia's Consumer Price Index, the price increases in the

Food, Beverage and Tobacco category saw the most dramatic increases. That category

was up 13% in September, compared with 6.4% in September 2006.

Several economists said Cambodia's increased inflation is being caused by high international

food prices, currency inflation as well as the sharp increase in oil prices.

"The main factor is higher international food prices, including, importantly,

China where food price inflation rose to 18% in August," John Nelmes, IMF Resident

Representative in Cambodia, told the Post.

Nelmes said the effect of the weak U.S. dollar is hard to separate from other factors,

but it is also a factor that affects inflation because it make goods imported from

neighboring countries more expensive for Cambodians.

"Another factor is the recent sharp increase in international price of oil,

which has recently fed through to higher fuel prices in Cambodia."

Another view came from Neou Seiha, Economic Researcher of the Economic Institute

of Cambodia, who said the limited local supply of food contributes to inflation because

the agricultural sector in Cambodia increased only about 2-3% this year, not enough

to meet increased demand.

Some local suppliers are choosing to export agricultural products to other countries

due to the higher international food prices, making domestic food prices increase

even more sharply.

Tal Nay Im, Director General of the National Bank of Cambodia, said the depreciation

of the dollar affects inflation in Cambodia because Cambodia is a dollarized economy.

But she put the greater blame on the appreciation of Thai Baht in relation to the

riel and the dollar.

"Cambodia imports a lot of things from Thailand, so when the Baht appreciates,

even if the value of the goods stays the same we still need to pay more riel or dollar

for that same product. We don't produce so much stuff, not even daily products, so

we need imported goods. Inflation is inevitable."

Nay Im said inflation wouldn't affect the garment industry because the transactions

are done in dollars.

Nay Im said with inflation still in single digits, no monetary policy changes are

needed.

Nelmes reiterated that, "The appropriate policy response is to allow the economy

to adjust to those higher prices by its own accord," he said.

The National Institute of Statistics projected inflation in 2008 at 5.5% and said

it will stay at about that level for the next few years depending on international

oil supply and the U.S economy.

Meanwhile, for the average Cambodian, the situation is tough.

"I hope the goods prices will not increase anymore. I can't afford to pay for

food that gets expensive month by month with the same money my children give me,"

said Liang Phalla, 56, negotiating a price for some dried fish at O'Russey market.

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