Special Report 1 - August 1997
Coping with the Current Crisis: A Survey of Five Phnom Penh Markets, 15-17 July 1997
Toshiyasu Kato, Long Vou Piseth, Be Kalyanna & Chan Sophal

Abstract

This CDRI special report assesses the economic impact of the current crisis in Cambodia precipitated by two days of intra-government fighting on 5 and 6 July 1997. The study focuses particularly on the effects the recent events have had on market prices and on the volume of goods and services considered essential for people’s daily life in Cambodia. The data in this report are based on a survey undertaken in five major markets of Phnom Penh from 15-17 July, ten days after the fighting.

The main findings of the survey are as follows:

- The prices of some items, such as rice and gasoline, appear to have soared during the two days of 5 and 6 July. Consumers’ expectation of supply shortage may explain the price surge of these items at this time. In the 10 days after the 5-6 July incidents, the prices of rice and gasoline were still higher than those before 5 and 6 July. The prices of other essential food items, especially those produced domestically such as vegetables, fish and pork, kept stable at more or less pre-5-6 July levels.

- Overall price levels measured by the consumer price index have increased 3.8 percentage points from June to 15-17 July. This is high for a half-month inflation rate. Our survey, however, found some evidence to support the argument that high inflation triggered by the 5-6 July events may be temporary, and therefore not likely to persist over an extended period of time.

- The survey points to a sharp reduction in the demand for goods and services after 5 and 6 July. A majority of the vendors interviewed reported that their customers and sales had dropped by half, or more, since 5 and 6 July. This led them to express concern about the current and future state of their businesses and livelihoods.

In short, the study indicates that inflation per se may not necessarily be a serious problem for the Cambodian economy in the current circumstances. It raises, however, the likelihood that the sharp reduction in market transactions after 5 and 6 July could cause a recession in Cambodia. A recession would affect people’s livelihoods severely. The government urgently needs to ensure the safety and security of all citizens in Cambodia. Only then will the situation normalise and revitalise businesses and economic activities to prevent a recession from setting in.

Contents
(excluding appendices and bibliographies)