The World Bank (WB) is optimistic about Laos’ economic growth, which is projected to rebound to 6.5 percent in 2019, higher than the figure of 6.3 percent recorded in 2018.
Illustrative image (Photo: nhandan.com.vn)
The pickup is expected to be driven by robust investment in mega infrastructure projects, according to the WB’s Lao Economic Monitor released on August 12.
The country’s economic growth will also be supported by a resilient service sector led by wholesale and retail growth associated with robust construction.
Meanwhile, the Lao Government remains committed to fiscal consolidation to contain public debt in the medium term by tightening public spending and improving revenue administration. This may result in a decline in the fiscal deficit from 4.4 percent of GDP in 2018 to 4.3 percent in 2019.
Laos’ economic growth is rebounding after declining in 2018 partly due to the impact of floods, Vientiane Times quoted WB Country Manager for Laos Nicola Pontara as saying.
However, he warned, Laos is at high risk of debt distress and several measures needed to be undertaken to deal with this situation.
Strengthening revenue collection is important to create fiscal deficit space and reduce the burden of public debt, Pontara said.
Looking forward, it will be important to improve the business environment to support development of the private sector, including the growth of small-and medium-sized enterprises (SMEs). These measures can contribute to maintaining a stable macroeconomic environment, promoting job creation and reducing poverty and inequality, he added.
Lao Senior Economist at the WB Lao Office, Somneuk Davading, said compared to other countries in the region, Laos’ economic growth remains strong and the nation is one of the top five fastest economies in the region.
Nevertheless, he said, the Lao Government needs to continue its reform measures and further improve the investment climate to attract more capital.
The depreciation of the kip against the US dollar and Thai baht is another concern for Laos, which could impact on debt serviceability, according to the WB report.
The report also notes the key constraints faced by small and medium enterprises such as access to finance, competition with informal firms, and electricity outages.
It confirms that strengthening the performance of SMEs can improve the quality of jobs, generate income and contribute to the greater well-being of the Lao people.