The annual inflation rate in Cambodia last year was well below government expectations, clocking in at 1.2 per cent, compared to the official estimates of 3 per cent, according to the central bank’s annual report.

The National Bank of Cambodia’s yearly report found that inflation dropped to 1.2 per cent last year, from 3.9 per cent in 2014, on the back of low oil prices, inflation pressures easing in countries the Kingdom imports from, and the effective management of the nation’s monetary policy.

The report further attributed this drop to a 4 per cent easing in food prices and 9 per cent decline in transportation costs.

Economist Teng Delux said global drops in raw materials, such as iron ore, also helped lower the inflation rate. He added that the falling rate had created a risk of deflation.

“Inflation can provide some push to economic growth, while deflation curbs growth, as is happening in Japan.”

The report also showed that low inflation rates in countries exporting goods to Cambodia, as well as a favourable exchange rate-based inflation due to the riel’s appreciation, helped lower the prices of Cambodia’s import-heavy trade balance.