Experts Warn That Gasoline Prices Could Slow Economy

Economists warned Wednes­day that the continuing rise of gasoline prices might affect prices across the board and slow the country’s economy.

In Phnom Penh gasoline costs had increased from about 4,500 riel for a liter of “premium” last week to about 4,750 riel Wednes­day, and diesel from about 3,900 riel to 4,200 riel for the same period according to several companies’ petrol stations. That marks a more than 5 pe­rcent increase. Regular gasoline prices hovered around 4,650 riel Wednesday.

“It affects everyone directly or indirectly,” said Chan Sophal, president of the Cambodian Economic Association.

Chan Sophal said that the climbing gas prices will raise production and transportation costs, and that will lead to an across-the-board price increase. It could also slow down the economy, as people will have less disposable income to consume things and fuel the economy.

A high demand for oil—which reached the record-high international price of nearly $110 a barrel on Tuesday—as well as a weak US dollar are to blame, said economist Sok Sina.

“There is no sign of a price decline,” he said, adding that rising prices are a concern for foreign in­vestors and could affect national growth.

Consumer prices hit a record-high increase of 18.7 percent from January 2007 to January 2008, according to the National Institute of Statistics. Food prices had increased more than 20 percent for that same period and economists say those price increases are driven in part by high fuel costs, which rose about 16 percent, according to the NIS.

Rong Chhun, president of the Cambodian Independent Teach­ers’ Association, said Wednesday that he wrote to Prime Minister Hun Sen this week about his concerns over price increases.

“Salary has increased a little bit, but the price of goods increased twice as fast,” he said.

He said teachers, soldiers, garment factory workers and other people with low wages will suffer the most from high gas costs.

Chea Peng Chheang, secretary of state for the Ministry of Finance, said the government has no plans to decrease gasoline taxes, but added that the government has kept those taxes at the same very low rate for many years—a plan it intends to continue.

“Whatever the international price jumps to, the government will not increase any tax on gasoline or diesel,” he said.

He added that food prices will lower when government irrigation plans increase rice production.

Motorbike taxi driver Nuth Neoun, a 44-year-old from Takeo pro­vince, said Wednesday that he has less money to buy food for his family and school supplies for his five children.

“I am worried that if the price of gas goes up to 5,000 riel I won’t have enough money to support my family,” he said.

Gas prices have cut into profits, he said, leaving him with $2.50 day, rather than the $3 a day he took home six months ago.

(Additional reporting by Tim Sturrock)

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