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Inflation can benefit low-cost businesses
While many people are concerned about inflation, some small local producers might consider the situation to be good for them as their products will sell at a higher price.
National Economic Research Institute Acting Director General, Dr Liber Leebuapao, said the higher food prices might benefit some small producers, such as those who are independent producers and use natural resources that require low investment. These might include vegetable growers and fish pond owners.
“These people might be happy to see that their output can provide them with more money than ever before.”
“I have some fish ponds that are natural and require only a little investment. I am happy that the price of fish is up as I can charge more money when selling them,” said Dr Liber.
“However, if we use our profits to buy items in the higher priced economy, it is not beneficial.”
Dr Liber said there are two groups of producers. The situation is good for those who use natural methods that require only a little investment. But the situation is not favourable for those who pay more for their production costs; they may find it challenging and have to put up their prices.
The recent global changes in the prices of food and fuel have caused increases in Laos. Many big and small restaurants have adjusted their food prices based on higher investment costs.
Recently, the ABD projected the inflation rate for Laos this year at around 6.5 percent and projected GDP growth of 7.7 percent. In 2010, the inflation rate hit 5.98 percent, with particular highs in September (8.14 percent), August (7.98 percent) and October (7.87 percent).
To address inflation, the government employs various monetary measures, promotes increased domestic production and reduces imports. In December, the central bank raised its interest rate and uses its exchange rate policy to address inflation.
The government also promotes the use of the kip by directing most of its revenue departments to accept only kip and has asked wholesalers and retailers to use it when quoting prices.
Many countries regionally and globally are also struggling with higher food and fuel costs and are employing various policies to combat inflation.
According to the Xinhua news agency, the World Bank reported recently that the higher food prices are the biggest challenge facing developing countries.
The World Bank is concerned that the food and energy crisis is resulting in price pressures and volatility, putting developing countries and their most vulnerable populations at risk.
Xinhua also reported that the World Bank's food price index, which measures global prices, is now 36 percent above its level a year earlier and remains close to its 2008 peak.
The i ndex is concerned with high and volatile international food prices and their impact on vulnerable populations, as well as the long term risks they pose to growth and poverty reduction.
vientiane times
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