Laos reportedly has one of the highest inflation rates among countries in Southeast Asia, which could have a severe impact on the country’s achievement of Millennium Development Goals on poverty reduction in 2015.
The United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) has forecasted inflation rates in the region for 2011, with Vietnam the highest with 9.9 percent, followed by Indonesia (6.2), Philippines (4.4), Thailand (3.5) and Singapore (3.3).
According to the Bank of the Lao PDR, the inflation rate in Laos hit 6.06 percent in January this year, rising to 7.15 in February and 7.66 in March.
The rising price of fuel in world markets and high food prices are the main drivers of inflation, affecting the livelihoods of people in the whole Asia-Pacific region including Laos.
The ESCAP estimates show that despite strong economic growth in the region driving global economy, rising food and oil prices could lead to an additional 42 million people living in poverty, joining the 19 million already affected in 2010.
The UN has warned that high inflation may postpone the achievement of the Millennium Development Goals by half a decade in many countries in the region.
Natural disasters in food-producing countries, increasing use of crops in biofuels and speculation in commodity markets, have added to a long-term decline in agricultural investment and affected global food supplies.
Last year, Laos experienced both flooding and drought, causing major losses in the agriculture sector, raising concerns for food security as the majority of the country’s more than 6 million population rely on agricultural production for their livelihoods.
ESCAP has urged countries in the region to protect poor and vulnerable households through strengthening of public food distribution systems, food vouchers, school feeding programmes and other targeted subsidies.
Governments in the region needed to moderate prices through tariffs and tax policies, regulation of hoarding and speculative activity, and the countercyclical use of buffer stocks.
The governments also need to improve quality job opportunities, expand social security programmes and promote agricultural and rural development. Bridging the region’s huge infrastructure gaps using its equally huge savings can boost jobs and incomes.
Meanwhile, regional inte-gration should focus not just on deepening integration within subregions, but also fostering trade links across subregions.
The ESCAP study warned that least developed countries should not focus simply on producing more of the same goods and services, but need to expand the range and complexity of the goods they produce.
A pragmatic strategy to build productive capacities in least developed countries is to let these be generated or acquired as part of the process of strategic diversification through the combined efforts of the ‘development’ State and the private sector, supported by development partners.
Last year, the Lao economy grew by 7.9 percent, but the growth was mainly driven by the resources sector, which is considered unsustainable growth.
Worse, the inflation rate was also very high in some months of last year, including 7.89 percent in August and 8.14 percent in September, affecting the livelihoods of the rural poor.
