Laos

The macroeconomic situation of Laos has become significantly worse over the past two years as a result of both external and internal factors. Of the external factors, the depressed international environment in the Southeast Asian re gion, in the wake of the Asian crisis, has played a critical role. The fact that Thailand, one of the countries most hit by the Asian crisis, is the main trading partner of Laos (and also its largest foreign investor) explains the high vulner ability of Laos. This is not the whole story, however. Domestic factors in Laos have also contributed to fuelling macroeconomic fragility, as evidenced by the higher inflation and much larger exchange rate fluctuations than in neighbouring countries. Inflation reached 87 per cent in 1998 and was estimated to be more than 100 per cent in 1999. The Lao currency, the kip, depreciated by no less than 90 per cent in relation to the U.S. dollar between mid-1997 and mid-1999. Further, the kip fluctuated like a yo-yo during 1999: from some 5,000 kip per dollar in early January, it plunged to 10,000 kip per dollar in June, then appreciated to 5,800 kip in September and dropped again thereafter to 7,600 kip in December.1 Political inertia contributed greatly to the rapid deterioration of the macroeconomic stance in 1998 and 1999 by slowing down, and in some cases even blocking, the intro duction of a less accommodating macroeconomic policy and financial and banking reforms. On the other hand, economic growth has continued at a slower pace than before (4 per cent in 1998 compared with 6.6 per cent on average between 1991 and 1997) but better than in neighbouring countries, reflecting a kind of de-linkage of the real economy from the monetary economy

Economics · Political science · Southeast Asian Sociopolitical Studies

• Laos in 2000 the Economics of Political Immobilism

  Yves Bourdet•Asian Survey•2001

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