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Laos Growth Resilient Despite Economic Headwinds

Source: TheStar

Despite a new set of challenges like the long dry season, Covid-19 outbreak, and US-China trade war, Laos looks set to enjoy stable growth of at least 6 per cent, possibly 6.3-6.4 per cent.

According to a report by the National Institute for Economic Research, electricity production will help spur the economy, especially the Xayaboury hydropower plant, which started commercial operations in December.

Investment from domestic credit is also expected to see stable growth, especially in SMEs, hotels, restaurants, trading, agriculture and retail and wholesale businesses.

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The construction and agriculture sectors will also provide a larger contribution if there is no serious impact from natural disasters.

Last year’s prolonged dry spell may affect agricultural production and low reservoir levels could cause cuts in electricity generation, added the report.

Meanwhile, the continuing Covid-19 outbreak in China may affect the region’s service sector, including in Laos.

The Chinese government has banned Chinese tour companies from travelling outside the country. This means that in the first two months of this year, Laos could lose earnings of about US$20-25 million from cutbacks in the tourist trade.

This figure is likely to increase if tourists from other countries stop coming to Laos because of concerns about the health situation in the region.

Meanwhile, trade between Laos and other countries is fluctuating amid a slowdown in the global economy and the region due to the trade war and conflict between the United States and Iran.

These issues are taking a toll on the export of Lao goods such as garments, coffee and electronic goods.

To ensure economic growth remains stable, the government should pay more attention to acting on important advice, such as actively seeking solutions to economic issues and obstacles to development.

Sectors with strong growth potential such as agriculture and tourism should be developed so Laos can benefit from regional and international integration by increasing revenue in these fields.

It is especially important to improve standards of education so that the workforce is more highly skilled, knowledgeable and capable, and that value chain production is enhanced using advanced technology.

Also of importance is a stronger response to climate change and natural disasters, which are likely to affect the economy more and more in the future, while officials should closely monitor and promptly respond to disease outbreaks.