Prices and Monetary Developments
Price levels picked up during the first half of 2012 but will likely cool down in the second half of the year due to changes in energy prices and major food related items. Therefore, the inflation rate has been upwardly adjusted by 30 basis points to 4.8 percent year-on-year in 2012. The value of the Cambodian riel has been fairly stable against the US dollar but it appreciated against the IMF Special Drawing Rights (SDR) as a result of the European sovereign debt crisis and also gained against the Thai baht. The appreciation of the riel against the baht has a negative impact on domestic prices of paddy rice to a certain extent, as a significant portion of paddy rice is traded in the Thai currency. There was a marked increase in liquidity in the Cambodian economy as of May 2012. Yet the growth rate of the amount of local currency in circulation was slower during that period compared to the same period in 2011. Meanwhile, there was a remarkable drop in average interest rates as of April 2012 due to fierce competition in the banking sector and lower borrowing costs. …
