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Laos’ Eonomic Growth Outlook Stable For 2019, 2020

Source: Vientiane Times

Economic growth in Laos is expected to remain stable this year and next, supported by the expanding agriculture, energy, industry and services sectors, says a new Asian Development Bank (ADB) report.

The Asian Development Outlook (ADO) 2019 forecasts Laos’ gross domestic product (GDP) growth to remain at 6.5 percent in both 2019 and 2020.

Industrial growth is forecast to edge up slightly to 8.1 percent in 2019 from 8.0 percent in 2018, largely because of sustained infrastructure development and increase in electricity generation.

The agricultural sector is expected to expand by 2.5 percent in 2019 and 2020 and the services sector is expected to grow by 6.7 percent, thanks to the government’s efforts this year to attract tourists from the People’s Republic of China and neighbouring countries.

Laos’ economic growth will remain steady because of the recovery in agricultural production and strong growth in electricity generation, construction and tourism related services, said ADB Country Director to Laos, Mr Yasushi Negishi.

“To maintain macroeconomic stability and achieve inclusive and sustainable growth, the government should further reduce public debt as well as improve public finance management in areas such as revenue collection, debt management and reductions in fiscal deficits in the coming years,” he said.

Inflation is forecast to remain at 2.0 percent in both 2019 and 2020 as global oil prices are expected to be lower than 2018 and food prices to remain subdued due to the recovery in agricultural production.

The current account deficit is expected to widen to 9.5 percent of GDP in 2019 and 10 percent in 2020. Electricity exports will edge up this year, thanks to new generating capacity, which will help push up the volume of the country’s exports by 12 percent in US dollar terms both in 2019 and 2020.
Meanwhile, import growth will accelerate by 13 percent this year and 12 percent in 2020 to support the construction of hydropower projects, expressways and the railway.

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International reserves are forecast to fall, to just under US$1 billion in 2019, which will cover 1.3 months of imports.

Risks remain, including an uncertain global trading environment, while the potential worsening of the country’s fragile external payments position is a major domestic risk as well as the threat of natural disasters.

Growth remains strong across most of developing Asia but is set to moderate this year and next year against the backdrop of slowing global demand and persistent trade tensions.

ADB’s flagship economic publication forecasts that growth in the region will soften to 5.7 percent in 2019 and 5.6 percent in 2020, while developing Asia’s growth in 2018 was 5.9 percent.

Excluding the newly industrialised economies of China, Republic of Korea, and Singapore, developing Asia is forecast to expand by 6.2 percent in 2019 and a slightly slower 6.1 percent in 2020, while in 2018 growth was 6.4 percent.

With the region facing ever-higher disaster risks, developing Asia urgently needs to build its resilience before catastrophe strikes, through better planning, setting aside government budget and encouraging insurance.