Source: Vientiane Times
Lao researchers are optimistic about the growth of the Lao economy, which is projected to expand by 4.5 percent this year amid global economic challenges.
The economic growth will be driven by the services sector in association with the growth of the tourism and processing industries and agricultural production for export, according to the latest report from the Macro-economic Research Institute of the Lao Academy of Social and Economic Sciences (LASES).
The Vice President of the LASES, Dr Kikeo Chanthaboury, told a meeting in Vientiane on Wednesday that the reopening of China, a key trading partner of Laos, and the launch of the cross border Laos-China Railway on April 13 have contributed to significantly bolstering regional trade and people-to-people exchanges.
Dr. Kikeo said the Laos-China Railway provides an opportunity to Laos to boost its export, tourism and logistics sectors. However, he said challenges remain as Laos is grappling with rampant inflation, high public debt, depreciation of the local currency and the outflow of Lao workers to other countries.
Another challenge for Laos is regulating exchange rates as the weak kip is directly impacting the cost of goods and services in the country, he said.
The government is tightening its monetary policy in response to skyrocketing inflation, which was recorded at 39.89 percent in April, down from 41 percent in March.
According to the Macro-economic Research Institute’s report, the services sector is expected to grow at 4.8 percent this year, driven by the recovery of the tourism sector, wholesale and retail trade, restaurant and hotel services and the logistics sector.
Rebounding economic growth in China, a market of 1.4 billion people, will be beneficial to Laos as China is the main market for the country’s agricultural products and also the largest foreign investor.
Meanwhile, the agriculture sector is anticipated to grow at 3.5 percent in 2023 as more capital is being pumped into boosting productivity for both domestic consumption and exports.
The industrial sector is expected to grow at 4.6 percent in 2023 and this will be driven by export-related processing industries in special economic zones and the energy sector.
The construction sector too will continue to grow this year and in the medium term. However, financial difficulties faced by the government and falling capital inflows from other countries could affect this sector.
Another challenge for Laos is sizeable investments going into the resources sector, a trend which is not sustainable. It is critical to diversify the national economy and ensure that economic growth results in more people being employed.
While Laos has huge potential to boost commercial production, increase exports, and benefit from the Laos-China Railway and tourism, the concerned sectors need to do more to turn the country into a regional hub and capitalise on the opportunities offered by the railway.