Lao Economy

Revenue Shortfall Challenges 2018 Growth Target

Source: Vientiane Times

Revenue shortfall is likely to force the government to maintain state investment in 2018 at the same level as this year, which will pose a challenge in achieving next year’s economic growth target, according to a government report.

If state investment is not increased, Laos is unlikely to achieve the 7 percent growth target set for 2018, Minister of Planning and Investment Dr Souphanh Keomixay told a government meeting last week.

To achieve the Gross Domestic Product (GDP) growth target, it will be necessary to inject a general state budget of 3,800 billion kip into the economy, up by 1,000 billion kip compared to 2017.

But after the ministry held talks with the Ministry of Finance, it was decided that the state budget could allocate only 2,800 billion kip – the same amount as for 2017 because of the revenue shortfall, the minister said.

Dr Souphanh presented a draft socio-economic development plan for 2018 at the two-day meeting between government cabinet members, the Vientiane mayor and provincial governors.

However, the draft sets the general state budget at 3,800 billion kip. The draft, which targets 7 percent growth, will be submitted to the National Assembly’s ordinary session in October for approval.

“We need to develop infrastructure so the budget must increase to help grow the economy,” he told the meeting.

“If we just allocate a general state budget at the same amount [2,800 billion kip, as in 2017], the economy can grow at a certain level but might not reach 7 percent as targeted.”

According to the draft, 40 percent of the state investment budget is allocated for debt repayments, 5 percent is to go to projects financed through Official Development Assistance (ODA), another 40 percent will be allocated to complete unfinished projects, and the remaining 15 percent will go into new investment projects.

To achieve 7 percent growth, the government is also aiming to source 9,062 billion kip in ODA and 19,720 billion kip from domestic and foreign private investment. The remaining 8,763 billion kip is set to come from bank credit for injection into the economy.

The struggle to source sufficient state investment funding for 2018 has arisen due to the expected revenue shortfall this year.

The finance ministry’s report suggested that revenue collection for 2017 was expected to reach 23,489 billion kip, representing 98.1 percent of the year’s target set at 23,941 billion kip.

The National Statistics Bureau also forecasted that Lao GDP growth for 2017 would reach 6.83 percent, falling short of the 7 percent target.