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Laos Maintaining Growth Momentum For 2018, 2019: ADB

Source: Vientiane Times

The nation’s economic growth is likely to be sustained this year and accelerate next year, while inflation will edge up according to the Asian Development Bank (ADB).

In ADB’s flagship annual economic publication, Asian Development Outlook 2018, the bank forecasts gross domestic product (GDP) growth for Laos to reach 6.8 percent in 2018 and to accelerate to 7 percent next year.

“Despite the government’s ban on logging exports, tighter credit conditions, subdued international mineral prices and lower tourist arrivals, Laos maintains its growth momentum supported by mega infrastructure development projects, increased electricity generation and expansion in the service sector,” ADB Country Director to Laos, Mr Yasushi Negishi said.

The industry sector slowdown that began in 2017 persists but is compensated by slightly higher growth in services.

Some hydropower projects now under construction will come online in 2019, notably the 1,300 MW Xayaburi hydropower development project, and the industry sector will reverse its declining trend, Public Management Specialist, Mr Rattanatay Luanglatbandith reported at the launch of Asian Development Outlook 2018 in Vientiane yesterday.

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Meanwhile, barring more bad weather, agriculture should continue to grow around three percent and service sector growth is forecast to strengthen mildly as tourist arrivals are expected to recover from last year supported by Visit Lao Year 2018, he said.

While growth momentum is maintained, inflation is expected to remain moderate at 2.0-2.5 percent, Mr Rattanatay explained.

The current account deficit is projected to expand to 14.9 percent of GDP in 2018 as higher inflation, rising international oil prices and large imports of machinery for the mega infrastructure projects drive up the import bill while export growth moderates, he revealed.

When the new hydropower projects start operation, electricity exports are expected to pick up in 2019, pushing the current account deficit down to 13.7 percent of GDP, Mr Rattanatay said.

External risks to Laos’ outlook include an expectedly large slowdown in trade and heightened instability in global or regional financial markets. A bigger risk could occur if the government’s efforts to consolidate its finances are not successful, threatening debt distress under conditions that foreign exchange reserves barely cover normal imports, he said. A development challenge for the country is a mismatch between the skills that young people acquire in schools and those in demand by the labour market, Mr Rattanatay said.

“There had been substantial efforts made by the government to generate employment and income for people in Laos, Mr Negishi noted. “For more inclusive growth, the government needs to further enhance its efforts to provide labour with skill sets to respond to demands in the labour market,” he added.