World Bank Forecast: Laos’ Economic Growth Lower Than Expected

Source: Vientiane Times

The World Bank (WB) has predicted that Lao economic growth will be slightly lower than the Lao government and Asian Development Bank (ADB) forecasts.

In its October 2017 Edition of the East Asia and Pacific Economic Update report released on Wednesday, the WB forecast Lao gross domestic product (GDP) will grow by 6.7 and 6.6 percent in 2017 and 2018 respectively.

But the Lao government’s reports suggested that the country’s GDP would grow by at least 6.83 percent in 2017 with a target to pursue 7 percent growth in 2018 – some 0.13 and 0.4 percent higher than the WB’s forecasts.

Meanwhile, the ADB’s projection revealed on September 29 that Lao GDP would grow by 6.9 percent and 7 percent in 2017 and 2018 respectively, some 0.2 and 0.4 percent higher than the World Bank’s forecast.

The World Bank’s forecast of moderate growth for 2017 was justified by several main factors including the decline in tourist arrivals and stronger controls over government spending amid high-level public debt.

Such factors are likely to continue to be challenges for the Lao economy next year, World Bank Laos’ Senior Economist Mr Somneuk Davading told Vientiane Times during the launch of the report on Wednesday.

Additionally, many investment projects are about to finish that would decrease investment volume, he added.

“However, Laos still enjoys high-level GDP growth in the region,” he said.

The World Bank’s forecast that Lao GDP growth would reach just 6.6 percent next year came as the government admitted that budget constraints had become a challenge in achieving 7 percent growth for 2018 as approved by the National Assembly.

To attain 7 percent growth, some 42,145 billion kip needed to be injected into the economy, Minister of Planning and Investment Dr Souphanh Keomixay told a recent meeting between government cabinet members, provincial governors and the Vientiane Mayor.

Of this amount, normal state investment must reach 3,800 billion kip, up by 1,000 billion kip compared to 2017.

But the Ministry of Finance said only 2,800 billion kip – the same amount as this year – could be sourced amid budget constraints caused by revenue shortfalls.

If proposed state investment in infrastructure was not increased next year, GDP growth might not achieve 7 percent, Dr Souphanh said.

On the other hand, the ADB forecasted that the Lao economy would achieve 7 percent growth next year.
Many factors are projected to drive the forecasted growth, ADB Lao PDR Resident Mission’s Public Management Specialist, Dr Rattanatay Luanglatbandith, told media on September 29 during the launch of ADB’s updated Asian Development Outlook 2017.

Electricity production outputs, import of construction materials for hydroelectricity projects and the US$5.8 billion Laos-China railway along with the planned launch of Visit Laos Year 2018 would be the main drivers of growth next year, he said.

Many new hydroelectricity plants are set to become operational next year, which was expected to increase power production output by 30 to 40 percent, he said.

Tourism-related services were expected to benefit from Visit Laos Year, which was estimated to draw in more tourist arrivals.