Laos Inflation Hits 25.35 Percent in February

Residents sell fruit at local market in Laos (Photo; Lao Aussie Fresh Market)

Laos continues to face economic challenges as inflation rates reached 25.35 percent in February, up from 24.44 percent the previous month, according to a report released by the Lao Statistics Bureau on 29 February.

The report indicates that while the overall inflation rate continues its upward trajectory, certain sectors have witnessed a slight decrease in prices.

In February, the hotel and restaurant category registered the highest price hike, standing at 35.1 percent year-on-year, a marginal decrease compared to January’s figures. Other sectors contributing to inflation include clothing and footwear, medical care and medicines, food and non-alcoholic beverages, and communications and transport, all experiencing substantial increases ranging from 22.6 to 35.1 percent.

According to the report, several factors have contributed to this surge in inflation. Firstly, increased demand during festivities such as Vietnamese and Chinese New Year has led to a rise in food prices. Secondly, soaring fuel prices, with diesel climbing by seven percent and gasoline by five percent, have exacerbated the situation. Lastly, the depreciation of the Lao kip against major currencies, including the US dollar and Thai baht, has further strained economic stability, depreciating by 1.70 percent and 0.61 percent, respectively.

In response to the challenges, the Lao government, led by Prime Minister Sonexay Siphandone, convened a monthly cabinet meeting from 28-29 February. The meeting aimed to address the country’s economic and financial hurdles and devise strategic plans to ensure sustained economic growth.

On 29 February, shortly after the monthly cabinet meeting, the government preliminarily approved draft laws and decrees to address economic challenges. These include laws on tourism decentralization, traditional medicine plant protection, countering money laundering, and dry ports.

To attract foreign currency into the country, the Bank of Laos (BOL) also implemented a new regulation mandating foreign investors, back in December last year, to open a Foreign Direct Investment Bank account (FDI) either in Lao Kip or a convertible foreign currency with a commercial bank to streamline the process for foreign investors looking to invest in Laos while ensuring greater transparency and accountability in capital flows.

The bank has also pledged to implement a tighter monetary policy to stabilize the kip’s value, aligning with the government’s ambitious goal of reducing inflation by nine percent in 2024.