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Laos needs measures to avoid Thai inflation impact: Economist
Laos expects to face stronger pressure in managing inflation amid rising food prices in neighbouring Thailand, a senior economist cautioned yesterday.
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| Shoppers at a Vientiane minimart feel the effects of price rises for Thai products. |
Lao National Economic Research Institute Director General, Dr Liber Libuapao, urged the sectors concerned to put in place concrete measures to accommodate the negative impacts of rising inflation in Thailand.
“Thai inflation has been one of the main driving forces of Lao inflation because we import food from the neighbouring country,” he said.
The inflation rate in Thailand rose 3.4 percent in February, causing a barrage of complaints from consumers, Thai media reported.
According to Dr Liber, more than 50 percent of imported goods in Laos come from Thailand so it is possible that rising prices there will also drive up inflation in Laos in the coming months.
He said the institute carried out a survey which found that the inflation rate in Laos had risen higher than in Thailand because importers had to pay import duty and transport costs. At the same time, importers expected to make a bigger profit from sales, having invested more in the goods they purchased.
“We have learnt that inflation in Laos has exceeded that of Thailand. However, we are still looking at, for example, the effect of a one percent rise in inflation in Thailand on the rate of inflation in Laos,” Dr Liber said.
Other main drivers of inflation in Laos are the rising price of fuel on domestic and world markets, he said, adding that the increasing cost of fuel and transport would create opportunities for businesses to adjust the prices they charged for goods and services.
An insufficient supply of food items, especially vegetables, due to recent flooding, was also one of the main drivers of inflation in Laos, he said.
According to a study by the Lao National Economic Institute, the inflation rate in Laos will be 8 to 9 percent this year, which is higher than the projected GDP growth rate of 8 percent. In January this year, year-on-year inflation rose 6.69 percent.
The rising cost of living is having a serious impact on Lao people, especially low wage earners.
Some economists say the inflation rate would be much lower if SMEs expanded in accordance with GDP growth.
At present, economic growth derives from major industries such as electricity and mining, which employ a small percentage of Lao nationals. The growing incomes of Lao people due to the wealth generated by the mining and electricity sectors is creating an increasing demand for food, but an insufficient supply of food is leading to higher inflation.
The agriculture sector is growing at an annual rate of 3.5 percent, one of the best reflections that GDP growth does not boost the supply of food.
Economists have urged the government to use the income generated by the mining and hydropower sectors to boost SME development and the non resource based economy to ensure sustainable growth.
vientiane times
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