Cambodian Economy Pinched by Inflation in 2005

The inflation rate averaged almost 6 percent in 2005, up from an average 3.9 percent in 2004, an average 1 percent in 2003 and zero inflation in 2002, according to the National Institute of Sta­tis­tics.

The rise in consumer prices was driven by a spike in the inter­na­­tional price of petroleum and in­creased prices of local food due in part to last year’s drought, eco­no­­mic experts said Tuesday.

“The inflation rate has in­crea­sed because of the rise in the ga­so­line price which is a regional trend, and also because the price of the food increased,” Minister of Plan­ning Chhay Than said.

The government will attempt to re­duce this higher level of prices but is limited in what it can do, he said.

“We will try to limit the increases and try to bring the percentage lower than 5 percent,” he said. “Ho­wever, the government cannot set the price or tell people in the market what prices to charge.”

Finance Ministry First Sec­re­­­­­ta­ry Kong Vibol was too busy to com­ment Tuesday, while Mi­ni­ster of Finance Keat Chhon could not be reached.

Meat registered some of the lar­gest increases in 2005, with pork fat up 19 percent, chicken up 18 percent and beef up 14 percent. Vegetables and fruits were each up 18 percent, according to the final 2005 inflation data.

The pump price of petroleum de­creased from a high of $0.92 per liter in September to $0.87 per li­ter at the end of the year.

Still, this represents a 10.84 percent increase over fuel prices last year.

Those being squeezed the hard­est are, unsurprisingly, those in the transport industry.

“Last year was the worst profit I have made in the five years since I starting driving,” trucker Sok Sambo, 48, said outside Phnom Penh’s O’Russei market. “I can make only [$2] a day now instead of [$2.50].”

Although economists link the in­­creases in food prices in 2005 to high­­er transport costs, Sok Sam­bo and others say they are bearing the brunt of the fuel increases be­­cause they cannot raise fares.

“There is more and more com­pe­­tition here, if I charge they will not accept,” he said.

Meng Heang, 52, a van driver who plies the route between Kom­pong Cham province and Phnom Penh twice a day, said 2005 was his worst year since 1995.

“I use 30 liters of gas to get to Kom­pong Cham and I can barely make enough money now,” he said. “The price has come down a lit­tle bit recently, but I appeal to the government to reduce the price of fuel more.”

Kang Chandararot, executive di­rector of the Cambodia Institute of Development Study, said the in­flation trend is alarming.

“If you look at the inflation rate in 2004, then you can see it is co­ming close to doubling,” he said. “This is a reflection of the structure of the economy: Limited domestic production and increasing demand due to increased population.”

He said new surveys conducted by his institute indicate that an in­creased rate of land transactions in the countryside has re­duced the production of vegetables and other foodstuffs.