Lao economic growth may see a substantial reduction to as low as 7.5 percent this fiscal year as the government cuts its investment budget in public infrastructure, according to a senior economist.
“Our latest projection is that economic growth will be around 7.5 percent to 7.8 percent this fiscal year,” the Lao National Economic Research Institute Director General, Dr Leeber Leebouapao said on Friday. “The government has agreed with the projection.”
In April, the institute and Ministry of Planning and Investment forecasted that economic growth would be about 7.8 percent, lower than the earlier estimation of 8.3 percent due to delayed implementation of the mega investment projects.
The decision of Sepon Mine, the largest gold and copper operation, to cease gold production also contributed to the slower economic growth, the institute reported.
Dr Leeber said the slowdown of growth was the first in two years after the economy experienced rapid growth of at least eight percent. He also said that Lao economic stability would remain in place despite the slowdown in economic growth.
Many officials said the other main factors, which cause the slow down, are not just due to the delayed implementation of the mega investment projects but also the government’s decision to suspend investment in public infrastructure to avoid economic crisis.
They said the investment in the public infrastructure such as roads, state agency offices and public facilities to host regional events played a significant role to drive Lao economic growth, adding that it is impossible for the country to permanently drive economic growth to 8 percent due to public infrastructure investment.
World Bank has also lowered its Lao economic growth forecast to only 7.2 percent in 2014, with a moderate slowdown of 8.1 percent recorded for 2013.
The Asian Development Bank (ADB) has forecast that the Lao economy will see growth of 7.3 percent, which is slightly less than the Lao National Economic Research Institute. However, ADB senior economists said that the Lao economy was still one of the top performers in the region in terms of economic growth.
Dr Leeber said that one of the major concerns was increasing inflation, adding that the government was struggling to achieve its revenue collection targets, which causes widespread money circulation and drives the inflation rate in the country.
“Our current inflation projection is about 6 percent this year,” he said, adding that people are facing a rising cost of living.
He also said that rising public debt was one of the other concerns among economists, adding the government should come up with concrete measures to curb the debt otherwise the country will face financial crisis.
Source: Vientiane Times