Families in Laos Face New Economic Challenges as Impact of Covid-19 Recedes

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Rice farming family in Laos (Photo: FAO)
Families in Laos are facing new economic challenges even as the impact of Covid-19 diminishes (Photo: FAO).

While the negative impacts of Covid-19 appear to be receding, households in Laos are facing new economic challenges, according to the World Bank.

Results from Round 5 of the World Bank’s COVID-19 Rapid Monitoring Phone Surveys, released on 30 June, show that although economic activities have resumed in most sectors, the overall situation poses a problem for all families trying to rebuild livelihoods that were affected by the pandemic.

Two years after the first COVID-19 lockdown was imposed in April 2020, Laos fully reopened its borders on 9 May this year, ending many of the restrictions introduced during the pandemic.

However, recovery from the economic slowdown caused by lockdowns is proving gradual, and new global shocks are provoking extra pressure.

“Covid-19 created global inflationary pressures as a result of disrupted supply chains and rising food and fuel prices” says Alex Kremer, World Bank Country Manager for Laos.

“This problem is now being made worse by various factors, including the war in Ukraine, and some Lao people are missing meals as they try to cope with a situation out of their control. While people are trying to return to normal, they face difficulties and many need help.”

The latest survey shows that most businesses have opened again following the end of lockdown.

By May this year, almost 90 percent of family businesses had resumed pre-pandemic operations or started a new venture. However, revenues are yet to fully return to pre-pandemic levels, with over half the family businesses surveyed saying that earnings remain lower than they were before Covid-19.

The overall share of households reporting income losses since the pandemic started is still high, although the scale of losses has dropped by 20 percentage points.

The proportion of people reporting being out of work declined from over 30 percent to 12 percent from late 2021 to May 2022, thanks to economic revival and the start of the rice season.

Farming is recovering faster than other sectors, with 93 percent of farm households interviewed reporting normal farm operations in 2022 — approximately 20 percentage points higher than in late 2021. However, nearly 90 percent of farm households said their operations are affected by rising prices for fuel and farm inputs.

Wages are also recovering, with almost three-quarters of wage-earning households reporting earning as much or more than at the same time last year, when the second lockdown was imposed. Poorer households are benefitting from the return of both wages and remittances.

However, there is a danger that this recovery could be swamped by inflation: 86% of survey respondents said they are affected by rising prices, with 52% citing a “significant impact”.

Around 65 percent of households interviewed have reduced education and health spending to cope with inflation. About the same ratio are limiting their movements or using bicycles in response to rising fuel prices.

As food becomes more expensive, families say they are reducing food consumption, switching to cheaper food, wild foods, or eating self-produced food. The proportion of households experiencing severe food insecurity rose to 23% in April/May 2022.

The latest monitoring round found the impact of COVID-19 on learning to be significant. Over the past 12 months, 42 percent of children in surveyed households stopped attending classes either temporarily or permanently, with the proportions higher among rural households.