Source: Vientiane Times
The International Monetary Fund (IMF) is predicting that Laos will see economic growth of just 2.2 percent this year, before rising 3.1 percent in 2023 and 4.3 percent in 2027.
The IMF’s October projection remained unchanged at 2.2 percent, which was also projected in July, but the figure was downgraded from 3.2 percent forecasted in April.
The IMF’s downgraded growth for Laos is linked to both external and internal factors, with the report forecasting that global growth will decrease from 6.0 percent in 2021 to 3.2 percent in 2022 and 2.7 percent in 2023.
“This is the weakest growth profile since 2001 except for the global financial crisis and the acute phase of the Covid-19 pandemic. It reflects significant slowdowns for the largest economies: a US GDP contraction in the first half of 2022, a euro area contraction in the second half of 2022, and prolonged Covid-19 outbreaks and lockdowns in China with a growing property sector crisis,” the IMF report stated.
“About a third of the world economy faces two consecutive quarters of negative growth. Global inflation is forecast to rise from 4.7 percent in 2021 to 8.8 percent in 2022 but to decline to 6.5 percent in 2023 and to 4.1 percent by 2024.”
“Upside inflation surprises have been most widespread among advanced economies, with greater variability in emerging market and developing economies.”
In Laos, the skyrocketing price of fuel and the petrol shortage in May and June have had huge effects on economic activities, notably agriculture and manufacturing.
Meanwhile the Asian Development Bank (ADB) has lowered its 2022 growth outlook for Laos to 2.5 percent from 3.4 percent projected in April and to 3.5 percent from 3.7 percent for 2023.
The downgrade is linked to supply disruptions and rising commodity prices, which have increased inflationary pressures.
In addition, the World Bank’s East Asia and Pacific October 2022 Economic Update also lowered the growth forecast for Laos this year, to 2.5 percent from the earlier 3.8 percent projection and 3.8 percent for 2023.
In September, the Lao Academy of Social and Economic Science (LASES) lowered its economic growth forecast for Laos to 3 percent this year, from 4 percent projected in previous months.
The academy said the downgraded projection of economic growth is due to slow expansion in sectors relating to consumption, exports, and private and state investment.
According to the IMF, the revisions of global growth outlook reflect the downgrade for growth in China, to 3.2 percent in 2022, the lowest growth in more than four decades, excluding the initial Covid-19 crisis in 2020.
The IMF report noted that the external environment is already very challenging for many emerging market and developing economies. The sharp appreciation of the US dollar adds significantly to domestic price pressures and to the cost-of-living crisis for these countries.