KPL
The Lao PDR’s economy continued its robust expansion with growth around 7.5 per cent in 2014 and domestic demand fueled by robust activity in construction, forestry, and services, according to World Bank’s latest report.
Street vendor, photo by World Bank
(KPL) The Lao PDR’s economy continued its robust expansion with growth around 7.5 per cent in 2014 and domestic demand fueled by robust activity in construction, forestry, and services, according to World Bank’s latest report.
The World Bank’s Lao PDR Economic Monitor also identified policies that the Lao PDR can adopt to benefit from the increased regional integration that will result from the upcoming integration with the ASEAN Economic Community (AEC), and also highlighted the importance of creating productive jobs to drive inclusive growth.
The report noted that the Lao PDR’s continuing economic growth is taking place in a macroeconomic environment which is gradually improving but remains fragile. While investment in the power sector is expected to remain strong, overall GDP growth is projected to slow to about 6.4 per cent in 2015 due to low outputs in mining, efforts to reduce the fiscal deficit, and a slowdown in credit growth. Given existing macroeconomic vulnerabilities, a moderate temporary deceleration of economic growth associated with reduced fiscal and finance sector risks is welcome.
“The government has taken some steps to restore macroeconomic stability, but it is critical that these efforts continue,” said World Bank Country Manager for the Lao PDR, Sally Burningham. “In the longer term, efforts to create a conducive business environment and create more productive jobs can help the country to grasp opportunities from regional integration, as well as foster shared prosperity and reduce poverty.”
The report indicates that the fiscal deficit in FY14/15 is expected to decline slightly to 4.2 per cent, as improved tax administration offsets lower resource revenues and controls on spending remain tight. Public debt is estimated at 60 per cent of GDP by end-2014. Credit growth has slowed, but continued monitoring of the financial sector is necessary to safeguard stability.
With regard to the ASEAN Economic Community, the report suggests that creating a favourable business environment and ensuring the effective implementation of reforms will best equip the Lao PDR to benefit from increased regional integration. As a member of the AEC, the Lao PDR may expect to see new opportunities for foreign investment, lower costs for some imports, and potential future inflows of professional services that the country lacks. The report also suggests that more jobs could be created to promote diversified private sector investments in sectors such as agriculture, manufacturing and services. Building job-relevant technical skills and strengthening early childhood education would help ensure that the workforce has skills required to fill the jobs that are available.
KPL
