Lao Economy

Laos Facing Large Trade Deficit

Laos is experiencing a widening trade deficit as the value of exports has fallen while imports have surged in the first nine months of this fiscal year.

According to the latest report from the Ministry of Industry and Commerce, the export value for the first nine months of 2013-14 was US$2.6 billion, a 7.6 percent drop compared to the same period last year.

This decline is not surprising as most of the goods that Laos exports are natural resource-based, such as mining products, according to economists who have undertaken studies into Laos’ economy.

They said existing mines are expected to be exhausted by 2030 so Laos needs to develop new businesses to ensure sustainable economic growth.

The Sepon mine, one of the largest mining operations in Laos, has already halted gold production after the mine’s resources were depleted.

The government is speeding up the construction of hydropower plants, with all of the major power stations expected to start commercial operation by 2025.

The ministry’s report, which was drafted by the Import and Export Department, also shows that the main recipients of Laos’ exports are still Thailand, China and Vietnam.

Data shows that the export value of Lao goods to China and Vietnam saw a rapid increase of 65 percent and 64 percent respectively, while exports to Thailand increased by only 0.25 percent in value.

The Import and Export Department reported that the value of imports was US$3.5 billion over the nine month period, up about 30 percent compared to the same period last year.

Laos’ main imports are electronic equipment, fuel and vehicles. Most imports come from Thailand, accounting for 61 percent of the total. The value of goods imported from Thailan d rose by 37 percent compared to the same period last year.

The value of imports from China and Vietnam rose by 37 percent and 3.6 percent respectively.

Growing foreign investment in Laos is said to be one of the main driving forces of the surge in imports.

Economists say the growing trade deficit will make it tougher for Laos to secure a sufficient supply of foreign currency for importers. The Bank of the Lao PDR has restricted currency exchange, aiming to build strong foreign currency reserves that will secure imports for a period of five months.

Source: Vientiane Times