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Laos Faces Growing Inflation

Source: Vientiane Times

Inflation continued to increase in December, sending a strong warning that serious action is needed to rein in the price of goods and services to prevent them rising further, according to a senior economist.

“If the rate of inflation is higher than GDP growth, the growth means nothing,” acting president of the Lao National Economic Research Institute, Dr Leeber Leebouapa, told Vientiane Times on Friday.

To maintain a healthy economy, he said the government needs to slow down the rate of inflation so that it is less than GDP growth, which is projected to grow at 6.5 percent this year.

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He made the comment after the National Statistics Bureau unveiled the latest inflation rate, indicating a rise to 6.28 percent in December, up from 5.34 percent in November and 1.5 percent in January 2019.

Data from the Bank of the Lao PDR shows that the average inflation rate in 2019 was 3.32 percent, which was below the GDP growth rate, which was estimated at 6.4 percent in 2019.

When asked about the government’s response to spiralling inflation, Dr Leeber said the government was on the right track and had stepped up efforts to stabilise the value of the kip and boost productivity.

“The government has a sound policy and measures to address the increasing rate of inflation. However, the challenge will be the effective implementation of these measures,” he added.

Dr Leeber warned that if the relevant agencies fail to implement the government’s policies effectively, rising inflation would lead to an increase in the cost of production and the country would be less competitive in the marketplace.

He also said that people on low incomes would struggle to make ends meet because they would earn the same amount of money but would be unable to purchase the same amount of goods and services.

The National Statistics Bureau’s report indicates that the main driver of inflation in December was the rise in price of food and non-alcoholic drinks, which was estimated at 10 percent.

The price of pork, which increased by 4.33 percent, also made a significant contribution to the inflation rate. In Vientiane, the price of pork has risen beyond the price fixed by the government.

The Vientiane Industry and Commerce Department claims that middlemen were the cause of the price increase, noting that the price charged by the main wholesale suppliers remained stable.

Observers say it’s necessary to investigate the price structure, adding that the findings would provide a reference for policy intervention such as encouraging pig farms to increase the supply of pigs and pork products to markets.