Source: Vientiane Times
The International Monetary Fund (IMF) is projecting that Laos will see economic growth of just 2.1 percent this year, down from the 4.7 percent growth rate predicted in April.
The lower growth rate is attributed to the prolonged outbreak of Covid-19 and recent lockdowns, which have delayed the resumption of economic activities and caused rising unemployment.
Director of the Asia and Pacific Department at the IMF, Mr Changyong Rhee, said in an opinion piece published recently that the pandemic had had a severe impact on Laos this year, requiring stringent restrictions on travel and social interaction.
“As in many countries in the region, Laos’ growth outlook has been revised down, to 2.1 percent in 2021, and with a slow recovery expected thereafter,” he said.
“And for Laos also, the uncertain course of the pandemic dominates the economic outlook. Much depends on progress on vaccination.
Unfortunately, Laos faces one of the crucial constraints noted in the Regional Economic Outlook – a lack of fiscal space.”
Going forward, domestic revenue mobilisation and careful management of public spending are needed to ensure that resources can be directed to health care and spur inclusive and sustainable medium-term growth, he added.
However, the future for subsequent years looks brighter. In its recent Regional Economic Outlook, the IMF has forecast that Laos’ economic growth will recover to 4.2 percent in 2022 and 4.5 percent in 2023.
With regard to China (one of Laos’ main trading partners), the IMF report said the economic growth rate is projected at 8 percent in 2021, 5.6 percent in 2022 and 5.3 percent in 2023.
The IMF says recovery in China remains unbalanced because private consumption continues to lag amid repeated virus outbreaks and significant fiscal policy tightening.
Meanwhile, emerging markets and developing economies, notably the Asean-5 countries (Indonesia, Malaysia, the Philippines, Singapore and Thailand), are still encountering severe challenges from a resurgent virus and weakness in contact-intensive sectors.
The projected growth rate in Thailand is 1 percent in 2021, 4.5 percent in 2022 and 4 percent in 2023; in Indonesia (3.2 percent in 2021, 5.9 percent in 2022 and 6.4 percent in 2023); Malaysia (3.5 percent in 2021, 6 percent in 2022 and 5.7 percent in 2023); and Vietnam (3.8 percent in 2021, 6.6 percent in 2022 and 6.8 percent in 2023).
Growth in Laos, Cambodia, the Pacific islands, and South Asia is suffering from the hit to tourism and constrained policy space.
According to the IMF, the Asian outlook for 2021 has been downgraded by more than 1 percent to 6.5 percent compared with the April 2021 World Economic Outlook because of new peaks in the pandemic cycle driven by the highly contagious Delta variant.