Research On The Key Factors That Affect The Inflation Rate In Lao PDR

Inflation is one of the main key factors in Lao economybecause inflation is affect the revenue or income of people, theprice stabilization, and also the economic stabilization. Therefore, I would like to present on this issue with the topic of "The Key Factors that affect the Inflation Rate and Its effect to Financial in Lao PDR from year1990-2012", which mainly focus on2factors including:an inflation issue in Lao PDR during year1990-2012; and economic factors that affect the movement of inflation rate in a country. For this research, I focus on6indicators such as inflation rate, exchange rate, interest rate, GDP, Government Expenditure, and Money Supply to verified and run E-view program to figure out the outcomes of inflation.In recent year, Lao economic growth is continuously developing rapidly in various sectors with current GDP growth rate between6-8%from the last decade. Particularly, the financial sector has become one of the most vital sectors, and while the economy growing up the inflation also rise up. The inflation rate in Laos was recorded at4.73percent in December of2012. Inflation Rate in Laos is reported by the Bank of the Lao P.D.R. Historically, from year1989until2012, Laos Inflation Rate averaged22.83Percent reaching an all-time high of167Percent in March of1999and a record low of-2.26Percent in August of2009. In Lao PDR, the inflation rate measures a broad rise or fall in prices that consumers pay for a standard basket of goods. Inflation has trended downwards since November2011, due to a decrease in food and fuel inflation.Headline inflation fell from7.9percent in November2011to4.4percent in April2012. Foodinflation has declined from10.7percent to6percent in the same period following a decline in the rice price.Declining rice prices are explained by a high base effect in2011, a harvest season of irrigated rice in recentmonths, and the government’s tightened control on rice exports. Energy prices continue to grow, but at aslower pace compared to last year due to a high base effect in2011and the fuel price cap set by thegovernment. This slowdown drove energy inflation down in April this year. Core inflation started to pick upin April2012due to higher prices in housing and electricity tariffs as well as restaurants and hotels.As above mentioned on key factors and economic indicators which can affect the movement of inflation in Lao PDR, most of Lao economist believe that the main causal factors that lead to high inflation are come from those6indicators that mentioned above.