The overall macroeconomic situation in Lao PDR remains fairly stable with slightly lower inflation
(10 percent in July compared to 10.3 percent in June) and stronger kip against US$ and Thai baht.
The averaged inflation for the first seven months of the year (Jan-Jul) was about 8.5 percent -- within
the GOL’s target of one digit inflation for 2008.
Figure 1. Food and nonfood prices (% change)
Non-food CPI (59.1%)
10.3 10.2 10.0
7.7
8.7
6.4
5.6
5.6 6.1
6.3
4.2
May-08
Mar-08
3.6
3.5
Jan-08
3.5
Nov-07
3.4
Sep-07
3.6
Mar-07
4.6
Jul-07
4.9
May-07
5.5
Jan-07
16
14
12
10
8
6
4
2
0
Food CPI (40.9%)
Jul-08
Total CPI
After picking up quite fast in
past month, the overall inflation
started to decline as food and
fuel prices in the country have
dropped very recently. Nonfood
prices have been fairly stable
during the last three months
(slightly below 8 percent) but
expected to decrease further due
to lower oil prices in the global
market.
Figure 2. Major breakdowns of food prices (% change)
Food (40.9%)
Rice (7.3)
Fish (4.8%)
35
Meat (11.9)
Vegetables (4.9%)
Poultry (2.3%)
Major food prices in Lao PDR
(rice, meat, vegetable, fish and
poultry) were lower in July but
remain vulnerable to seasonality
(especially flood).
30
25
20
15
10
5
Jul-08
May-08
Mar-08
Jan-08
Nov-07
Sep-07
Jul-07
May-07
Mar-07
-10
Jan-07
0
-5
Figure 3. Exchange rates (% change)
Kip/US$
2.0
Kip/Baht
Depreciation (%)
1.0
-3.0
-4.0
-5.0
Appreciation (%)
Jul-08
May-08
Mar-08
Jan-08
Nov-07
Sep-07
Jul-07
May-07
-2.0
Mar-07
-1.0
Jan-07
0.0
In July, the kip exchange rate
appreciated by 1.2 percent
against USD as well as Thai
baht. Between August 2007 and
July 2008, the nominal exchange
rate of kip appreciated by over
10 percent against USD and 9
percent against baht.