Lower economic growth rate in Laos sparks concerns
VIENTIANE (Vientiane Times/ANN) - A lower economic growth rate has sparked concerns that Laos may not meet the average targeted rate of 7.2 per cent as part of the country’s five-year economic development plan for 2016-2020.
Economic growth in Laos has reached only 6.7 percent over the past four years, which is lower than the target approved by the National Assembly.
The Minister of Planning and Investment, Dr Souphan Keomixay, told a recent news conference in Vientiane that time is running out with 2020 as the final year for the socio-economic development plan.
“Our government needs to work harder if we want to accomplish our five-year plan,” he said.
Dr Souphanh said Laos would need capital investment of 45.5 trillion kip (US$5.3 billion), equal to 26 percent of Gross Domestic Product (GDP), to ensure economic growth at a rate of at least 6.7 percent to 7 percent in 2020.
Of this amount, about 50 percent will be sourced from domestic and foreign investments, notably hydropower, development of special and specific economic zones, as well as the processing industry, and tourism. Some 22 percent will come from the banking sector, 11 percent from the national budget and the rest from official development assistance (ODA).
Over the past four years, Laos has struggled to grow its economy as a result of revenue shortfalls and external impacts, particularly the falling price of commodities and minerals, which are among the primary income earners for the country.
Dr Souphan said Laos remains vulnerable to the impact of external factors, and the trade dispute between the US and China could inevitably affect the domestic economy.
The government has acknowledged that the country has suffered from a chronic budget deficit, rising debts, falling currency reserves and financial leaks.
Although the government has imposed numerous measures to address these issues, the problems remain.
Natural disasters, notably floods that occurred in Laos last year, posed a great challenge for the government in its efforts to boost the economy.
As a result of the government’s budgetary tension, the administration was unable to repay debts owed to private enterprises that constructed state investment projects. The delayed payments for these companies hindered the growth of the business sector and job opportunities for local people.
In 2016, GDP growth in Laos was 7 percent, and it dropped to 6.9 percent in 2017 and 6.3 percent in 2018. The government has projected GPD growth in 2019 at only 6.5 percent to 6.7 percent.
Despite the economic slowdown, the government has tried to address unlawful trade, corruption and illegal logging while concentrating on improving the investment climate to attract more private capital into the country.
The government has vowed to boost agricultural productivity for exports and push for further development of mega projects to sustain the country’s economic growth. These include the construction of the Laos-China railway line, the expressway from Vientiane to Vangvieng, and hydropower projects.