Economy

Ukraine Invasion Stalls Cambodia’s Economic Growth

The Russian invasion in Ukraine has pushed global fuel and food prices, severely hampering Cambodia’s post-pandemic economic recovery and causing the premier to call for urgent measures.
A Caltex gas station in Phnom Penh's Chamkarmon district on June 13, 2022. Picture: Penh Chamroeun
A Caltex gas station in Phnom Penh's Chamkarmon district on June 13, 2022. Picture: Penh Chamroeun

Cambodia’s post-pandemic economic recovery has been slowed by the Russia-Ukraine war, Prime Minister Hun Sen said on Monday as he urged authorities to maintain macroeconomic stability, curb inflation and bolster purchasing power by using local currency.

While businesses have reopened elsewhere in the country, which is now welcoming with 400 weekly flights, recovery in Siem Reap province is not yet signaling signs of picking up from the impacts of Covid-19, the premier said at a graduation ceremony in Phnom Penh.

“We must be prepared to accept the fact that the economic downturn began with the Covid-19 crisis and [now] the war in Ukraine,” noted Hun Sen. “This is something that we must all strive to maintain: good macroeconomic stability, curb inflation, and maintain the purchasing power of the riel."

"Our economy has just recovered after Covid-19, and it is unimaginable that the Russia-Ukraine war has begun to put a burden on countries around the world.”

Hun Sen’s comments came in the wake of last week’s rise in gasoline prices countrywide to 5,800 riels per liter. This marks an increase of 150 riel. Diesel prices also rose to 6,100 riels per liter, a 550-riel increase.

The Ministry of Economy and Finance estimates the economy grew by 3 percent in 2021 and has forecasted 5.6 percent growth in 2022. The World Bank’s estimate for Cambodia in 2021 is 3 percent growth, with a 2022 forecast sitting at 4.5 percent.

The hike in gasoline prices has stoked social media trolls, who claim prices will never push past four digits because gas station price boards only have four-digit displays.

On Monday, rickshaw drivers shared with Kiripost how their lives have been affected by soaring prices as a result of the double crises.

“I am affected by the price increase of food, gasoline and LNG but I don’t know what to do,” said Theoung Yoeung, 37, as he waited for customers in Tonle Bassac commune.

Yoeung said as the results of soaring prices, ride booking service PassApp has increased his pay by 100 riels per kilometer. Yoeung said LNG price is now between 2,600 and 2,700 riels per liter. Prior to Covid, it was between 1,700 and 1,900 riels.

“I have become accustomed to it, this is our country, it's up to them to decide things, we can’t say anything, we might get into trouble,” he said.

There has been an increased push to use more riels in the Cambodian market, which depends heavily on the US dollar, lately, especially after sanctions imposed as a result of the Russia-Ukraine war. Several banks have started dishing out more riel notes and minimizing the output of US dollar bills under $100.

“In order to promote the use of Khmer riels, Union Commercial Bank Plc. would like to inform you that from 17-May-2022 onward, all of our ATMs will supply only USD100 notes and KHR20,000,” Union Commercial Bank Plc said in its notice to customers.