Inflation Hits New High of 41.3%

Source: Vientiane Times

The year-on-year inflation rate is continuing to rise, soaring to 41.3 percent in February, up from 40.3 percent in January, according to the latest report from the Lao Statistics Bureau.

The 23-year record high has had a severe impact on the economy over the past year, despite the government’s attempts to rein in spiraling prices.
The depreciation of the kip against the US dollar and Thai baht, combined with the high price of fuel, are among the key factors driving inflation. The weak kip is a major roadblock in the government’s efforts to curb the rising cost of goods and services, especially as one-third of the goods used to calculate price rises are imported.

Last month, the highest price rises were recorded in the food and non-alcoholic beverage category, followed by the communications and transport category, medical care and medicines, hotel and restaurant category, and household goods.
For instance, the price of Grade A rice has spiked by 67.4 percent over the past year from 8,591 kip/kg in February 2022 to 14,384 kip/kg last month, according to the Lao Statistics Bureau.

The price of pork rose from 51,198 kip/kg to 74,458 kip/kg (a 45.4 percent increase) and the price of eggs surged from 37,074 kip per box of 30 to 56,162 kip per box.

Meanwhile, the soaring cost of fuel has bumped up production costs as Laos is fully reliant on imported oil.

The price of diesel rose from 12,725 kip/liter to 17,215 kip/liter, according to the Lao Statistics Bureau. 

The inflation of 41.3 percent recorded in February is the worst rate that Laos suffered since the Asian financial crisis of 1997-98, with the kip significantly losing value against the Thai baht and US dollar.

The government has pledged to cap the average inflation rate at 9 percent this year, to minimize the impact on ordinary people.

Just recently the central bank offered its second tranche of BOL bonds worth 1 trillion kip as part of efforts to tackle inflation and stabilize the value of the kip. The bonds have a six-month maturity and a one-time non-transferable interest payment of 15 percent per year.

Many people are wondering why saving bonds are selling like hotcakes. Sales have been driven by the fact that commercial banks and depository financial institutions are permitted to purchase the bonds.

Inflation in Laos began its sharp upward climb early last year. Inflation was recorded at 12.81 percent in May 2022 before climbing to 23.61 percent in June, 25.62 percent in July, 30.01 percent in August, 34.05 percent in September, 36.75 percent in October, 38.46 percent in November, 39.27 percent in December.