Rising Inflation Threatens to Swamp Cambodian Households

Many Cambodian households were in a precarious position even before COVID-19 hit.

After the end of the financial crisis in 2009, Cambodia’s economy experienced vigorous growth, with GDP growth rates reaching 7 percent or more each year. But that growth has dropped off dramatically as a consequence of the COVID-19 pandemic. Hundreds of thousands of workers in the garment and footwear manufacturing sector, as well as in transport, tourism, and construction, have been affected by a sharp recession that has brought widespread job and income losses.

The shock has been caused in part by steep drops in household consumption expenditures, household savings, new FDI investment, and the amount and range of products being exported. Cambodia’s economic output shrunk by an unprecedented 3.1 percent in 2020 as a result of the pandemic. At the time, the Consumer Price Index (CPI) for December had reflected a year-over-year upturn of 2.9 percent, which at a glance appears to be an uncomfortably high rate of inflation.

At this point in the pandemic, Cambodia – like much of the world – is in a position of Knightian uncertainty, in which we do not know the outcome of a given situation and cannot know all the information we need to make accurate assessments about the future. When we talk about inflation and interest rates, we are doing so in a context where there are many things that we do not know and which will likely remain unknown for a very long time.

In full: https://thediplomat.com/2021/05/rising-inflation-threatens-to-swamp-cambodian-households/

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