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Laos’ Economic Prospects Remain Bright: IMF

Source: Vientiane Times

The International Monetary Fund (IMF) is predicting a favourable outlook for Laos’ economic growth in the upcoming years despite the present difficulties.

The international financial institution unveiled its projection last week as part of the Article 4 Consultation with the Lao PDR mission, which took place in Vientiane in May.

The projection states that ongoing private investment, increasing electricity exports and the completion of the Laos-China railway will help boost economic growth to 7 percent over the medium term.

GDP growth slipped to 6.3 percent in 2018, down from 6.8 percent in 2017. The slowdown was attributed to widespread flooding, which harmed agricultural and industrial productivity. 

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Last year a succession of tropical storms caused flooding across the country while the worst flood occurred in Attapeu province after the collapse of a dam at the Xe-Pian Xe-Namnoy hydropower plant.

This year, the government has suspended new public investment projects and imposed fiscal consolidation as part of efforts to maintain its sound financial position, the IMF said in its media release.

The IMF also projected that the large current account deficit was expected to persist due to the increasing demand for imports. The growth in imports would pose a big challenge for the government in maintaining a high level of gross international reserves.

Fiscal consolidation is also expected to continue. This will be supported by efforts to improve revenue administration and optimisation of spending and the government’s plans to reduce recruitment with the civil service.

The continued refocusing of capital spending to post-disaster reconstruction efforts as well as the suspension of new investment projects will help the government to maintain a sound financial position, the IMF said.

But despite the healthy outlook for economic growth over the medium term, Laos continues to face a number of risks. This includes risks caused by international factors such as the slowdown of the Chinese economy. China is one of Laos’ largest trading partners and FDI investor.

Domestic risks include the slower than anticipated implementation of committed structural reforms, and weather-related shocks.

On the upside, the IMF sees that faster regional growth and deepening integration of Laos within Asean will help boost investment, trade, and tourism in the country.