MOIT VIETNAM | The reasons for the economic slowdown in Laos
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The reasons for the economic slowdown in Laos
Lao media reported on August 3 that rising inflation and a weak Kip are believed to be part of the reason for the slowdown in the economic growth rate of Laos.
Figures from the Institute of Economic and Social Sciences r from the Ministry of Industry and Trade of Laos showed that in the first five months of 2021, the country's average inflation rate was 2.66%, and although this figure is still lower than that of the same period last year, it is still on the upward trajectory, There are other reasons why the economy of Laos is in trouble. Reasons such as, the the limited supply of goods, and the increasing costs of transport and export of goods from Laos. Not forgetting, the rising fuel prices and COVID-19 lock-down prevention measures also pose additional challenges to freight transportation.
The weakening value of the Kip against the Thai baht and USD, is also driving up inflation as most businesses have to import raw fuel and equipment from other countries. A devaluation of the kip means that costs would be higher, whereby increasing the cost of production and the cost of living. The exchange rate, in the first six months of 2021, between the Kip and the USD increased by 6.5% year-on-year, and the exchange rate between the Kip and the baht increased by 9.9%.
Due to a decrease in the number of foreign tourists, foreign investment and airspace usage fees, budget revenue has also decreased compared to the past year. According to the Ministry of Finance of Laos, the country's budget trade revenue in the first six months of 2021 only reached 11,005 billion kip ($1.15 billion), which is equivalent to 40% of the year's plan, and of which, domestic revenue only reached 9,900 billion kip, which hit 40% of the plan. The Ministry of Finance forecasts that the country's 2021 budget revenue will not meet the target, and projects it at only 23.6 trillion kip, which is equivalent to 86% of the year plan. According to Vientiane Times, a decrease in budget revenue will increase Laos' budget deficit from 2.17% of GDP to 4.33% of GDP. However, the Laos government will not adjust this year's budget because it has committed to increasing budget revenue and managing budget expenditure.
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