Inflation rate exceeds GDP growth in Laos

The inflation rate continues to rise in Laos, despite measures introduced by the government to limit rising commodity prices.

According to the latest Consumer Price Index (CPI) figures from the National Statistics Bureau, the inflation rate reached 9.76 percent in May, which is higher than the projected GDP growth rate of around eight percent. This is a concern for the government because the increase in wage and salary levels is being outstripped by the rising cost of goods and services.

According to the National Statistics Bureau, the driving forces of inflation are the increasing prices of food and non-alcoholic beverages, which rose by 14.7 percent while transport and communication costs rose 10.91 percent after a spike in world oil prices.

Alcohol and cigarettes saw a 6.19 percent increase, while the price of clothing and shoes rose by 3.63 percent. The price of accommodation, water and electricity supply was up by 4.20 percent.

Restaurant and hotel prices jumped by 4.28 percent, while the cost of postage and telecommunications grew by 4.14 percent. Recreation and entertainment costs saw a modest 1.80 percent rise. The cost of white goods was up 2.22 percent while education costs remained stable with only a 0.14 percent increase.

Minister for Industry and Commerce Dr Nam Vinhaket told Vientiane Times there were numerous factors driving commodity price increases but chief among them was rising world oil prices, which then had flow on effects in other sectors of the economy.

As an agricultural country with a largely rural population Laos would suffer more from increasing transport costs than many other countries, he said.

Dr Nam said illegal inflows of foreign currency were also adding inflationary pressures to the economy. The illicit trade in forest products was of particular concern, he said. It was a criminal enterprise which was very profitable for those involved, and they tended to spend the money as soon as they received it. The scale of the problem meant it was having a distortionary effect on the Lao economy.

The Lao government held an urgent meeting last week to address the issue, and discussed measures which may help to limit inflationary pressures on the economy. But as Laos imports most manufactured goods from neighbouring countries there is very little that can be done to limit price increases in this sector, they concluded.

The government intends to provide loan assistance to farmers so they can increase production levels and create stockpiles of rice and other staple foods which can be sold for a better rate as food prices increase.


Vientianetimes

Posted by samakomlao on 11:07 AM. Filed under development, Laos . You can follow any responses to this entry through the RSS 2.0. Feel free to leave a response