Source: Vientiane Times
The unanticipated Covid-19 pandemic has delayed economic recovery in Laos, with consumption hit hard by the virus control measures implemented since April, according to a report from the Asian Development Bank (ADB) on Wednesday.
Laos’ economy is now projected to grow by 2.3 percent in 2021, compared with the 4.0 percent expansion forecast in April, the Asian Development Outlook (ADO) 2021 Update reported.
The pandemic has resulted in lockdowns in Vientiane and some provinces, disrupting economic activities, causing rising unemployment, and lowering consumer spending.
According to the report, the pandemic has pushed an additional 75 million to 80 million people in developing Asia into extreme poverty.
However, the ADB report stated that global recovery is expected to spur domestic growth in 2022, albeit lower than projected in ADB’s previous forecast.
“Policies to reduce the spread of the coronavirus have curbed output in manufacturing and hurt growth in the retail trade, transport, and tourism services,” said ADB Country Director for Laos, Sonomi Tanaka.
“Curtailed economic activity has increased joblessness and reduced household incomes, especially among women and those with lower education. A swift recovery from the pandemic depends on policies that support businesses and households to adapt to the ‘new normal’.”
With lower domestic demand, inflation stayed at 3.1 percent on average in the first seven months of this year, according to the ADB.
The kip has depreciated against foreign currencies, with the spread between official and parallel rates for the kip and US dollar exceeding 20 percent in July, reflecting a domestic shortage of currency following large external public debt payments.
Revenue collection is yet to return to pre-pandemic levels, with public finances remaining constrained.
The report says Laos’ economic recovery will be supported by the issuing of new mining licences and earnings from electricity exports, as well as the planned opening of the US$5.9-billion Laos-China railway in December, linking the capital of Laos with China.
With a forecast of warmer temperatures and rainfall on-trend, rice and cash crop harvests are anticipated to be stable.
According to the ADB, commodity exports, notably food crops, electricity, and gold, remained strong in the first half of 2021, helping to offset continuing weakness in manufactured exports and payments for imports and investor dividends.
Challenges remain. New measures to contain Covid outbreaks and the pace of the vaccine rollout will impact the country’s economic prospects.
Measures to strengthen macroeconomic management and improve investor sentiment remain essential to economic recovery and household welfare, as reported in ADO 2021 in April.
Boosting development in agriculture and tourism is critical for Laos to alleviate poverty and advance its economic transformation.
Agriculture and tourism generate many job opportunities for local people and are an important source of foreign currency earnings.