Announcing its first inflation statistics in six months, the government revealed what it is calling a record-high inflation rate of 22 percent for July, although critics said Monday that the figure could still be understated.
The Ministry of Planning suspended the monthly publication of the consumer price index, which is used to calculate inflation, in March after it showed an inflation rate of 18.7 percent from January 2007 to January 2008.
Immediately after the release, officials called the March statistics inaccurate and the method used to calculate them incorrect, though several economists disagreed. Government officials also said the suspension of the inflation figures was not related to the buildup to the July 27 national election, in which the ruling CPP scored a landslide.
This week the National Institute of Statistics will resume its monthly publication of the CPI, Minister of Planning Than Chhay said, adding that domestic politics had nothing to do with the six-month suspension.
“This is a record high,” he said of the new inflation rate, which measures inflation from July 2007 to July 2008.
“This inflation will affect the people’s standard of living,” he said, adding that city-dwellers will feel the effects of inflation more than rural people who grow their own food.
After six months of debate, the government opted to discard a new formula used to calculate inflation in March in favor of one that has been in use for several years, he said.
The March inflation report showed a large jump in inflation. For example, under the old method, inflation was measured at 10.79 percent from December 2006 to December 2007, but the March calculation put the figure at 16.3 percent.
Chan Sophal, president of the Cambodian Economic Association, said Monday that the old method of calculating inflation, which is now in use again, doesn’t reflect buying patterns and understates the actual inflation rate.
“The new method is more appropriate because the share of expenses on gasoline and food are higher now than before,” he said.
The old method gives gasoline a weight of 1.7 percent in the CPI, while the new method gives it a weight of 5 percent, Chan Sophal said, adding that he planned to conduct his own calculations to determine what the inflation rate would be under the discarded method.
The country’s high inflation is mainly attributed to increasing petroleum prices and food prices, and while it will hurt many people, it doesn’t affect everyone negatively, Chan Sophal added.
“When the cost of rice is high, it’s good for the farmers but bad for consumers,” he said.
Kang Chandararot, executive director of the Cambodia Institute of Development Study, said inaccurately reporting the inflation statistics may have negative consequences.
It would make it more difficult for workers to justify needed wage increases, for economists to determine the country’s growth in terms of GDP and for banks to set appropriate interest rates, he said.
Kang Chandararot also said he believes the new formula would be more accurate.
“I would prefer the new formula because you have structural changes in the consumption spending in the households,” he said.
SRP lawmaker Son Chhay said now that the election is over, the government should release accurate inflation figures.
“Now there is no election. Why doesn’t the government produce a real number for a change?” he asked.
CPP lawmaker Cheam Yeap, who chairs the National Assembly’s commission on banking and finance, denied Monday that there were any political considerations when it came to the government’s reporting on inflation.
In June, CPP National Assembly First Vice President Nguon Nhel said the March CPI report reflected poorly on the government and could be used by the opposition to attack the government before the election.