Less than a year after inflation reached record highs, the consumer price index revealed that prices dropped by 0.7 percent in March 2009 compared to March 2008.
The reduction in prices follows a steady decline in inflation that began in May 2008, a month for which the World Bank reported record-high year-on-year inflation of 25.7 percent.
The latest CPI, released last week, showed that the most significant price decreases came in categories that had increased substantially a year ago: food and fuel.
The March report stated that over a 12-month period rice prices decreased by 9.6 percent, meat prices by 16 percent, liquid fuel prices fell by 24.8 percent, and cooking gas prices plunged 35.7 percent.
“It’s not a bad thing, it reflects the bust in overshooting commodity prices last year and reflects lower demand for commodities,” said Chan Sophal, president of the Cambodian Economic Association, adding that the reduction in prices also indicates an economic slowdown.
“The slowdown in the economy means less effective demand for investment and consumption,” he said.
Mr Chan Sophal said the drop in prices is due partly to the year-on-year comparison between the first half of 2008, during which prices rose dramatically, with March this year.
Despite the CPI reporting reduced prices over a 12-month period, prices actually increased by 1.9 percent overall in March compared to February.
The CPI will likely continue to show negative year-on-year inflation figures until June and July, because it was during June and July 2008 that commodity prices stopped increasing dramatically and began to level off, Mr Chan Sophal said.
Minister of Planning Chhay Than declined to comment by telephone Monday because, he said, he had not read the CPI report, which is put out by his ministry’s National Institute of Statistics.
The Planning Ministry’s ecretaries of state, Ouk Chay, In Saroeun and Hul Lim, also declined to comment and referred questions to Secretary of State Nger Chhayleang, for whom contact information was not available.
Stephane Guimbert, senior country economist for the World Bank, wrote in an e-mail that the CPI changes are due largely to world food and oil price fluctuations.
“Global prices have decreased significantly over the past year, hence generating a ‘correction’ in the inflation rate,” he wrote, adding that the drop will not be sustained.
The inflation rate is determined using prices contained in the CPI. To calculate the inflation rate certain items are given a greater weighting than others depending on the amount consumers typically purchase.
In 2008, a CPI report for the month of January used a new weighting method, which showed a spike in the inflation rate. The government then suspended publication of the report until after the national election in July last year and reverted back to the old methodology.
Beginning with the January 2009 report, however, yet another methodology was introduced.
Mr Guimbert wrote that the new methodology used by the government is standard and was developed with international assistance.
