Source: Vientiane Times
Inflation in Laos has surged higher than the projected rate for the Gross Domestic Product (GDP), sparking fears among many people regarding the impact on their living standards.
The government set an annual GDP growth target of at least 4 percent from now until 2025, but the year-on-year inflation rate jumped from 6.25 percent in January to 7.3 percent in February, according to the latest report from the Lao Statistics Bureau.
Consumer prices surged more than expected over the past seven months, propelled by the depreciation of the Lao kip against the Thai baht and the US dollar, and rising cost of fuel and other imported goods.
In February, the imported consumer price index went up by 1.4 percent month-on-month and 11.7 percent year-on-year. The price of this category tends to be driven by the cost of seasonings, sugar, dairy products, household items, vehicles and spare parts, and petrol. Laos is recorded as one of the countries with the highest inflation in the Asean region.
The price of fuel has increased seven times so far this year. The latest increase was implemented from March 18-23, and Phonsaly province has the most expensive fuel.
In February, the price of fuel and gas rose by 38.33 percent year-on-year, while the cost of gold products surged by 16.49 percent year-on-year, according to the Lao Statistics Bureau.
Senior economist and Dean of the Faculty of Economics and Business Management, National University of Laos, Associate Professor Dr Phouphet Kyophilavong, told Vientiane Times that the rising cost of fuel is one of the main drivers of inflation.
Fuel prices and inflation are inter-related since petrol is a major input of the Lao economy, with oil being used to fuel transportation and productivity.
The depreciation of the Lao kip means businesses will have to spend more to buy foreign currencies to import goods, particularly petrol.
Economists worry that the rising prices of fuel and food and the inflation in key trading partners of Laos will have consequences for the Lao economy and prices of products in local markets.
Meanwhile, the consumer price index for locally made products rose by 0.4 percent month-on-month and 5.3 percent year-on-year.
The price rise in this category was driven by the cost of pork, beef, fruits and vegetables.
The cost of fruits and vegetable went up by 6.85 percent year-on-year, while the price of meat and fish increased by 5.3 percent year-on-year. The price of rice increased by 2.69 percent per annum.
The government is taking steps to boost production in order to reduce imports, and to control the rising price of fuel to ease the impact on the economy and the general public.