Inflationary pressure not a cause of concern in Cambodia
Inflationary pressure not a cause of concern in Cambodia
The presence of inflationary pressure need not be a cause of concern for Cambodia for the year 2025, according to January update released on Monday by Asean+3 Macroeconomic Research Office (AMRO).
The report co-authored by economists Megan Chong and Catharine Kho predicts the region (Asean+3) including Cambodia to remain resilient with a steady growth rate of 4.2 percent in the current year despite a host of challenges.
It pointed out that the inflation in the region will be slightly higher. Countries other than Cambodia that will experience higher inflation are China, Hong Kong, Brunei, Malaysia and Thailand. As per Asian Development Bank (ADB), the country’s inflation is expected to remain stable at around 2 percent in 2025.
Higher inflation in Cambodia reflects improving domestic demand and supply-side adjustments that include reduction in energy subsidies, the report observed, adding that “overall inflationary pressure remains very well controlled”.
The report emphasised that these higher inflation numbers in countries including Cambodia will return to pre-pandemic levels eventually, dismissing causes of concern.
The country’s inflation stood at 2.94 percent in 2020 and rose to 5.34 percent in 2022, mainly fuelled by global inflation surge sparked by economic dislocation, supply chain disruptions, the fiscal and monetary stimulus provided in 2020 and 2021 by governments and central banks around the world in response to the pandemic, and price gouging.
Subsequently, it cooled to 2.1 percent in 2023. And International Monetary Fund (IMF) estimates suggested the inflation rate for 2024 to be 2.3 percent. The Ministry of Economy and Finance is yet to publish the final economic data for the year 2024.
Speaking to Khmer Times, Singapore-based economic analyst Tom Goh said inflationary pressure does exist in all emerging economies. “The real challenge for the governments is to contain this pressure while ensuring high GDP growth numbers.”
The report also said that if inflation in the US resurges, monetary policy is likely to be tightened, leading to a stronger dollar and tighter global financial conditions. “For Asean+3 economies, these dynamics could trigger capital outflows and exchange rate depreciations, and possibly higher policy rates and overall tighter financial conditions that would further weigh on growth.
“Despite these challenges, the Asean+3 region remains resilient, underpinned by sound fundamentals and robust domestic demand. The region has a strong track record of managing external shocks, including the Covid-19 pandemic, global supply chain disruptions, and ongoing US-China trade tensions.
“Most economies in the region entered this period of uncertainty with moderate fiscal space and well-anchored inflation expectations, providing room for counter-cyclical policy measures if necessary.”
The report called for Asean+3 economies including Cambodia to prioritise both immediate and long-term strategies to safeguard growth and resilience. “In the short term, currency flexibility is essential to absorb the impact of tariffs and partially offset losses in export competitiveness. Governments can also implement measures to support affected industries, such as streamlining customs procedures to reduce delays, providing timely information on tariff impacts, and offering targeted assistance to affected sectors.
“Regional cooperation will also be critical in mitigating these challenges. While pursuing proactive policy measures, regional economies must also be mindful of spillover risks and avoid policies – such as competitive devaluation – that would result in counterproductive outcomes.”
