World Bank: Growth Despite Inflation [... but inflation is a concern for poor Cambodians]

By Mean Veasna, VOA Khmer
Original report from Phnom Penh
01 April 2008

Cambodia's economic growth is expected to remain positive, despite nettling concerns over inflation, World Bank officials said Tuesday.

Inflation has increased in recent months, and it is not likely to decrease to its original level, which is a concern of the poorest Cambodians, a World Bank official said, following a semiannual report.

Cambodia's economy grew by 9.6 percent in 2007, according to the World Bank. That growth rate is expected to shrink in 2008, even as inflation hit a nine-year high at the end of 2007, the World Bank said.

"As we said in the report, the high inflation rate will not pose any serious threat to Cambodian economic growth for 2008, but it does impact the poor," said Huot Chea, a economist for the World Bank's Cambodia office.

Inflation will not decrease to its original level, but is likely to increase next year, from 5 percent to 10 percent.

"I guess about 25 percent of the poorest people in our country spend 70 percent of their total income on food," Huot Chea said. "So as long as food prices are rising, it automatically has a worse impact on their daily living standard."

Earnings that once bought 2 kilograms or 3 kilograms of rice can only buy 1 kilogram, he said.

The government has responded positively on inflation, he said, citing as example the recent ban on rice exports, the lifting of a ban on imported pigs and pork products and the release of a rice surplus on the market at a subsidized price.

However, sustained inflation could further hamper the government's poverty reduction efforts, said Tim Conway, a senior poverty specialist in the World Bank's Cambodia office.

Chea Peng Chheang, secretary of state for the Ministry of Finance, said Tuesday that estimates of the World Bank echoed predictions of the ministry.

Cambodia's high economic growth rate is sustainable, he said, because the growth is based mostly on agriculture, as well as tourism and construction.

"Of course, there will be an impact from inflation," he said. "But this inflation mostly affects countries that have important business with America."

Poverty reduction is not likely to be affected, he said, because the government has a strategy to prevent and delay the rate of inflation.

Rocketing inflation hurting Cambodia's poor, World Bank says

Tue, 01 Apr 2008
DPA

Phnom Penh - Double-digit inflation would not hurt the Cambodian economy overall but could have a dire affect on the country's millions of poor, a World Bank economist said Tuesday. Like most of East Asia and the Pacific, Cambodia had been badly hit by inflation with the year-on-year rate at the end of 2007 reaching a nine-year high of 10.8 per cent, Huot Chea said.

However, the bank said Cambodia's economy continued to grow rapidly with gross domestic product (GDP) up an estimated 9.6 per cent last year.

"High inflation rates will not pose a serious threat to the Cambodian economy but will impact on the poor," Chea told journalists.

"About 25 per cent of poor people spend 70 per cent of their income on food," the economist said. "As long as food prices keep rising, this will automatically impact on the poor."

He said inflation had pushed the price of the national staple, rice, up so far that what would have once bought 3 kilograms in some cases now just bought 1 kilo.

Hikes in international oil prices, which have put the cost of petrol up to 1.25 dollars a litre in a country where millions earn less than a dollar a day had also contributed, he said.

The bank also expressed concern about Cambodia's growing trade deficit, which it estimated would grow from 6.8 per cent to 7.3 per cent of GDP this year.

However, overall, it said Cambodia's economy was in good shape and was mainly being impacted by outside factors, including the rising world price of oil and the crisis in the US economy.

"Although risks have increased, economic prospects for 2008 remain strong," the bank said in a press release.