English
Laos’ Economy Continues Well; IMF Report
(KPL) On Feb 26, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV Consultation with Lao PDR stating that the country’s economy continues to perform well, supported by a favorable external environment and strong flows of foreign direct investment from its dynamic neighbors.
Growth in 2017 was supported by the expansion of electricity exports, construction activity and financial services, but moderated to 6.8 per cent as a result of the prohibition on illegal logging, tighter credit conditions and fewer tourist arrivals.
Inflation remained low at 0.2 per cent in December 2017, reflecting a stable exchange rate and a decline in food prices.
Private sector credit growth was robust at 17 per cent year-on-year in 2017, a pace consistent with dynamic economic activity and moderate financial deepening.
The current account deficit was high at 13 per cent of GDP in 2017, although it is estimated that about half the deficit reflected imports related to large foreign direct investment projects, including the Kunming-Vientiane railway project, which is part of China’s Belt and Road Initiative.
Nevertheless, gross international reserves remain low at about 1 month of prospective imports.
The authorities have developed a reform agenda to address some of the vulnerabilities in the economy, with the goal of supporting stable and sustainable growth to graduate from Least Developed Country (LDC) status.
Aware of the challenges presented by high public debt and deficits, they are moving to put in place a gradual fiscal consolidation mainly through tax policy and administration reforms.
They are also moving to strengthen the banking system by recapitalizing and restructuring public banks, restructuring loans related to infrastructure projects and improving regulation and supervision.
The authorities have also focused on integrating the Sustainable Development Goals (SDGs) into their 5-year development plan to promote inclusion and environmental sustainability.
Looking ahead, the outlook is positive, with growth on the order of 7 per cent per year, and gradual economic diversification matched by integration with ASEAN and China.
Source: http://kpl.gov.la/En/Detail.aspx?id=32451