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World Bank: Growth Despite Inflation

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.