Inflation worries hinder recovery: World Bank

via Khmer NZ News Media

Friday, 11 June 2010 15:00 Jeremy Mullins

REBOUNDING foreign trade is generating economic growth among Asian nations, including Cambodia, but inflation is an increasing regional concern, the World Bank says.

“Export volumes bottomed out toward the end of 2008 and early 2009, but have recovered rapidly since that time,” its Global Economic Prospects Summer 2010 report released Thursday said.

Price inflation is becoming a growing concern for Asian nations as regional economic conditions improve, it warned. “As spare capacity has been absorbed and with growth at double-digit rates, there are increasing signs of supply bottlenecks and incipient evidence of localised asset bubbles emerging.”

Ministry of Commerce figures show an average 4.5 percent price increase for a basket of 50 common goods to June 10 this year. The same basket, including goods ranging from sugar to steel to sarongs, deflated 0.7 percent during 2009, according to its Trade Promotion Department statistics.

The World Bank forecast a slightly revised estimate for Cambodia’s GDP growth this year, expecting a 4.8 percent increase in 2010, compared to its April prediction of 4.4 percent.

Many regional economies specialise in producing goods for foreign consumers, it said, and exports have “dropped off sharply with the global collapse of investment spending and retrenchment by households”.

East Asian economies generally avoided the initial shock of the financial crisis, but have almost immediately been challenged by its secondary effects, it said. “Both equity markets and currencies were hard hit as international capital fled to perceived safety, and/or given mammoth losses by financial institutions.”

European sovereign debt sustainability issues are the largest short-term roadblock to the international economy’s recovery, it said.

“Should these problems not be resolved in a smooth manner, global GDP could be much weaker.”

The Kingdom exported US $247.6 million in garments to the European Union from January to May this year, up 10.4 percent from $224.3 million for the same period 2009.