Lao Kip depreciation continues to harm economic growth, reports local media

VIENTIANE (Bernama-Xinhua): The Lao economy continued to grow at an average of 4 per cent annually over the past few years, though the quality of growth was not high due to the depreciation of the Lao currency kip, according to local media reports.

"The weak kip has resulted in a decline in per capita GDP from US$2,595 in 2021 to US$1,824 in 2023," Lao national TV on Thursday quoted Lao Minister of Planning and Investment Khamjane Vongphosy as saying at the ongoing sixth ordinary session of the National Assembly's ninth legislature.

He added that the government plans to increase the figure to US$2,880 by 2025.

These figures indicate that people's incomes have declined in real terms amid the rising cost of living.

The minister said depreciation of the kip is one of the main factors driving inflation and soaring prices, which is having a severe impact on people's standard of living.

Economic growth reached 3.5 per cent in 2021 and 4.4 per cent in 2022. The growth rate is projected at 4.2 per cent in 2023 and 4.5 per cent in 2024.

However, the inflation rate averaged 33.69 per cent over the past nine months, although it dropped from 41.26 per cent in February to 25.69 per cent in September.

The Lao government had hoped to reduce inflation to 9 per cent by the end of this year, but its attempts could fail, so the government has set the same target for 2024.

In addition, Khamjane said the kip had dropped in value by 18.4 per cent against the US dollar in September compared to the figure recorded at the end of 2022.

The government has pledged to stabilise exchange rates to slow inflation and increase foreign currency reserves to help the country overcome the challenges it faces.

The minister acknowledged that the government will need to do more to tackle economic and financial difficulties.

"In recent years, the government has attempted to improve the quality of state services, create job opportunities for local people to alleviate their poverty, and build infrastructure needed to facilitate agricultural production and income generation for local people," Khamjane said. - Bernama-Xinhua