Inflation, weak kip drive Laos economic slowdown

Local residents practicing COVID-19 preventative measures in Vientiane, Laos (Photo: Xinhua/VNA)

Vientiane (VNA) - The increasing inflation rate and the weak kip are partly to blame for the slow growth of the Lao economy, according to local media.

In the first five months of this year, the rate of inflation averaged 2.66 percent, which was lower than during the same period last year but showed an increasing trend, according to the Lao Ministry of Industry and Commerce’s National Institute for Economic Science and Society.

Other reasons for the struggling economy are an insufficient supply of goods and the rising cost to transport goods from Laos to other countries. The rising price of fuel and COVID-19 prevention and control measures are also posing challenges for the transportation of goods.

The weak value of the Lao kip compared to the Thai baht and US dollar is driving inflation because most businesses have to import raw materials and machinery from other foreign countries.

In the first six months of 2021, the exchange rate between the kip and dollar rose by 6.5 percent compared to the same period last year, while the kip-to-baht exchange rate increased by 9.9 percent.

According to the Ministry of Finance, the amount of revenue collected over the past six months totalled 11 trillion kip (1.15 billion USD), equalling 40 percent of the yearly plan.

The ministry predicts that State budget revenue will fall short of the target for 2021, saying that only 23.6 trillion kip would be amassed this year, equal to 86 percent of the target figure.

The projected revenue shortfall could result in the budget deficit rising from 3.9 trillion kip, or 2.17 percent of gross domestic product (GDP), to 7.9 trillion kip – 4.33 percent of GDP.

However, the government will not revise the budget for this year because it has pledged to boost national revenue and manage budget expenditure./.