LAOS IS STILL grappling with several challenges and pending issues impeding macroeconomic development despite robust expansion of the country’s economy when compared to regional peers.
Macroeconomic instability remains a worry even though Laos’s economic growth rate has been relatively high compared to that of other Asean countries.
The growth rate is still vulnerable and unsustainable because the resource sector remains predominant in the growth structure and electricity and construction are capital intensive rather than labour intensive, according to a report from the Ministry of Investment and Planning.
The state budget still lacks liquidity as budget revenue and expenditure are below the target, and the budget deficit to GDP ratio is still high.
The report said control on goods remained weak and not strict enough. Although foreign reserves increased, they were relatively low when compared to other countries. Many issues still have to be resolved to improve the business climate and to promote quality investment.
There was no progress noted in the production base, which was illustrated by the minimal value addition from non-resource sector production, and this is impeding the growth of investments. Public debts remained a constraint for private investment, especially domestic private investment.
This year, the government seeks injection of more than 42,000 billion kip into the economy to ensure that Gross Domestic Product (GDP) grows by 7 percent.
Around 4.6 trillion kip (Bt18 billion) of this total will come from public investment, 8 trillion kip (Bt30 billion) from official development assistance, 20.73 trillion kip from foreign direct investment and around 8.76 trillion kip from bank credit.
The macro-economy was stable in the first six months and enjoying robust growth, the premier said.
The estimated growth rate of 6.7 per cent is high compared to the growth rates in other Asean member countries, Prime Minister Thongloun Sisoulith said during the National Assembly’s (NA) fifth ordinary session.
Agriculture is estimated to exceed the growth target by 0.1 per cent to 2.9 per cent, representing 15.9 per cent of GDP. The GDP amounts to 152.43 trillion kip, equivalent to an average per capita income of US$2,609 (Bt86,000).
Growth in industry is estimated to fall short of the target by 2.1 per cent to 7 per cent, accounting for 31.2 per cent of the GDP. Growth in services is forecast to exceed the target by 1.5 per cent to 7.9 per cent, representing 41.7 per cent of the GDP.