Lao economy projected to grow at 4 % despite global challenges
The International Monetary Fund (IMF) has maintained the economic growth forecast for Laos at 4 % next year, but inflation remains a key challenge.
The projected growth is driven by exports and tourism, with the Laos-China railway boosting the regional economy and improving accessibility so that more foreign visitors can come to Laos.
Speaking at a press briefing on the regional economic outlook for Asia and the Pacific held in Singapore recently, the Director of the IMF’s Asia and Pacific Department, Krishna Srinivasan, highlighted the recent increase in fuel prices.
He said the IMF conducted a global analysis and found that a 10 % increase in oil prices leads to a 0.15 % decline in global output the following year and inflation going up by 0.4 percentage points.
“Now, clearly, with Laos being an oil importer, the impact is likely to be larger. So you can use that number as a benchmark and say how much more Laos is going to be affected, but it is going to be affected quite significantly. In terms of the forecast projection, I think you can see an uptick in both domestic demand and a pickup in tourism, which I think is huge in Laos. So I think that underpins a lot of the factors contributing to the growth forecast,” he said.
Srinivasan said the reopening of China, a market of 1.4 billion and a key trading partner of Laos, has given the service sector and retail sales a boost as experienced by other economies. However, the benefit to the manufacturing sector is proving to be short-lived.
“The real estate sector in China is grappling with further pressures on debt repayments, home sales, and investment. Based on these weaknesses, we have revised down China’s growth forecast to 5 % for 2023 and 4.2 % for 2024,” he said.
The projected growth for Thailand (Laos’ main trading partner) is 3.2 % in 2024, 5.8 % for Vietnam, 6.1 % for Cambodia, 5 % for Indonesia, 4.3 % for Malaysia, and 2.6 % for Myanmar.
Despite a challenging global environment, the Asia and Pacific region remains a relatively bright spot. It is expected to grow by 4.6 % in 2023 and by 4.2 % in 2024, which puts it on track to contribute about two-thirds of global growth this year.
It is also important to note that disinflation is on track in Asia, with inflation now expected to return to central bank target ranges next year in most countries.
However, inflation has risen in Japan, where the central bank has twice tweaked its yield curve control policy settings to manage risks to the outlook.
Inflation in Laos remains high. One of the main challenges in the coming months will be to curb inflation, as the rising cost of goods and services is creating extra hardship for people already struggling to rise above poverty.
However, the inflation rate rose more slowly in September at 25.69 %, down from 25.88 % recorded in August, according to a report from the Lao Statistics Bureau.
The Vientiane Times
Asia News Network
