Laos lays out economic growth path
The Laos government has unveiled a new national development vision, which it plans to facilitate from 2021 to 2025.
The plan entails the transformation of the economy from the current dependence on natural resources to a knowledge-based economy. In addition, economic growth must be environmentally friendly and sustainable.
In the recent decade, the economy in Laos has undergone rapid growth of more than seven per cent annually in average. However, current growth is mainly based on the exploitation of natural resources, which Lao policy makers and development partners view as being unsustainable.
According to the Vientiane Times, the government is well aware of the current economic situation and the need to restructure economic bases to ensure that growth is sustainable.
As part of efforts to ensure economic sustainability, the government said it has taken steps to improve the business climate, believing that this strategic move will encourage business operators to invest, operate and expand their businesses.
Economic growth is expected to have remained robust at 6.7 per cent last year when the official numbers are announced despite flooding-related disasters. Agriculture and industry are expected to have expanded by 2.5 per cent and 7.7 per cent, respectively. Manufacturing continued to grow, particularly within the Savannakhet, Vientiane and Champasak special economic zones. The services sector should have grown by 7.6 per cent, up from 4.4 per cent in 2017.
On the downside, declining demand around the world is driving down the prices of commodities such as mineral ores and rubber, which are key income-generating exports for Laos. But still, there is optimism that Laos will reach its goals. To that end, the government has set economic growth targets of 7.3 per cent in 2019 and up to 7.5 per cent in 2020.
However, rating agency Fitch disagrees and forecasts Laos’ real GDP growth to slow to 6.6 per annum over the coming decade, versus an average of 7.6 per cent in the last ten years. According to Fitch analysts, progress on economic diversification in Laos had in fact stalled, and further diversification would be critical if the country wishes to sustain its rapid growth pace.
The country’s external debt load has been increasing rapidly over the past few years, but these funds were being used for sub-optimal investments, which would weigh on future growth potential. Furthermore, a deteriorating business environment and worsening corruption were also detrimental to economic prosperity, Fitch said.
[caption id="attachment_32480" align="alignleft" width="300"] Restaurant on the Mekong River outside Vientiane, Laos © Arno Maierbrugger[/caption] The Laos government has unveiled a new national development vision, which it plans to facilitate from 2021 to 2025. The plan entails the transformation of the economy from the current dependence on natural resources to a knowledge-based economy. In addition, economic growth must be environmentally friendly and sustainable. In the recent decade, the economy in Laos has undergone rapid growth of more than seven per cent annually in average. However, current growth is mainly based on the exploitation of natural resources, which Lao policy makers...
The Laos government has unveiled a new national development vision, which it plans to facilitate from 2021 to 2025.
The plan entails the transformation of the economy from the current dependence on natural resources to a knowledge-based economy. In addition, economic growth must be environmentally friendly and sustainable.
In the recent decade, the economy in Laos has undergone rapid growth of more than seven per cent annually in average. However, current growth is mainly based on the exploitation of natural resources, which Lao policy makers and development partners view as being unsustainable.
According to the Vientiane Times, the government is well aware of the current economic situation and the need to restructure economic bases to ensure that growth is sustainable.
As part of efforts to ensure economic sustainability, the government said it has taken steps to improve the business climate, believing that this strategic move will encourage business operators to invest, operate and expand their businesses.
Economic growth is expected to have remained robust at 6.7 per cent last year when the official numbers are announced despite flooding-related disasters. Agriculture and industry are expected to have expanded by 2.5 per cent and 7.7 per cent, respectively. Manufacturing continued to grow, particularly within the Savannakhet, Vientiane and Champasak special economic zones. The services sector should have grown by 7.6 per cent, up from 4.4 per cent in 2017.
On the downside, declining demand around the world is driving down the prices of commodities such as mineral ores and rubber, which are key income-generating exports for Laos. But still, there is optimism that Laos will reach its goals. To that end, the government has set economic growth targets of 7.3 per cent in 2019 and up to 7.5 per cent in 2020.
However, rating agency Fitch disagrees and forecasts Laos’ real GDP growth to slow to 6.6 per annum over the coming decade, versus an average of 7.6 per cent in the last ten years. According to Fitch analysts, progress on economic diversification in Laos had in fact stalled, and further diversification would be critical if the country wishes to sustain its rapid growth pace.
The country’s external debt load has been increasing rapidly over the past few years, but these funds were being used for sub-optimal investments, which would weigh on future growth potential. Furthermore, a deteriorating business environment and worsening corruption were also detrimental to economic prosperity, Fitch said.
