GovernmentLao Economy

Higher Fuel Price Driving Inflation In Laos

Source: Vientiane Times

The rising price of fuel has become the new driving force behind inflation, sending a signal that the government must address this economic risk.

According to the latest report from the Lao National Statistics Bureau, inflation has risen by 1.88 percent, due to the rising price of fuel, which is seen as the main driver of inflation.

The price of fuel in Laos has increased by 17.15 percent compared to the previous year. The increase drove up the consumer price index of the transport sector by 3.61 percent compared to the previous year, said the recently released report.

Over the past few months, the government has adjusted the price of fuel several times. It reasoned that the rising price of fuel on the global market was the main factor behind this state intervention.

Another factor driving up inflation in April was the depreciation of the kip against international currencies, particularly the Thai baht and US dollar.

Laos imports most consumer goods from neighbouring countries, mainly Thailand. When the kip depreciated against the baht, the price of imported goods increased and this pushed inflation higher.
Data collected by the statistics bureau from the Bank of the Lao PDR showed that the value of the kip fell by 11 percent compared to the previous year.

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Alongside the increasing price of fuel and imported goods, the price of other goods and services remained stable or low, the bureau said, adding that they did not have much influence on the inflation rate.

According to the bureau, the year-on-year change in the Consumer Price Index of household goods was 1.44 percent, while the index of the clothes and shoes category saw a year-on-year change of 4.76 percent. The year-on-year change of the restaurant and hotel category index was 3.13 percent.

The government is aware of the rising inflation rate. Last month, the cabinet issued a notice to the sectors involved, particularly the Ministry of Industry and Commerce and the Ministry of Agriculture and Forestry, to regulate the price of food items.

The commerce ministry has listed a number of goods for which distributors need to seek permission before increasing their price. These include steel, cement and petrol.

The agriculture ministry has been urged to introduce measures to boost agribusiness output to supply more food to markets.