Tuk Tuks carrying tourists on a street in Luang Prabang. (Photo: AFP)Vientiane (VNA) – Laos’ economic growth will be moderate in 2019 and2020, projected to be at 6.2 percent, slightly lower than April forecast of 6.5percent, according to a new Asian DevelopmentBank (ADB) report.
In an update of its annual economic publication – AsianDevelopment Outlook 2019, the ADB revised down the forecast, saying it wasbecause expansion in the industry and services sectors softened in the firsthalf of 2019 as a result of lesser international tourist arrivals and nearstagnation in electricity exports and generation.
The report said in the first four months of this year, merchandise exports haveslightly increased compared with the same months last year as electricityexports grew only at 2.3percent, much slower than 7 percent a year earlier.
This indicates a slowdown in industrygrowth in the first half of the year and a deepened contraction in miningoutput. Meanwhile, growth in tourism, a proxy for the services sector, softenedas international tourist arrivals slowed from 6.1 percent in the first half of 2018 to 5 percent in the same period this year.
The Lao Kip appears to be overvalued,considering the significant premium over the official exchange rate paid on theopen market for hard currency.
The ADBforecast the country’s inflationto be around 2.3 percent in 2019 and 2020, slightly higher than the 2 percent projection in April due to continued pressure on food pricesand local currency depreciation.
Despite the Lao government’s expected improvement in the currentaccount deficit, gross international reserves are forecast to remain below 1billion USD by December 2019, covering only a month of imports, making the country’s position vulnerable to externalfinancial shocks.
The tight fiscalcondition, as Laos’ public debt remains high, holds back the government’sspending and investment in the country, said ADB Public Management Specialistfor Laos Rattanatay Luanglatbandith.
Laos being hit by major natural disasters over the two consecutive yearshave also prevented its economic growth to reach the projected level.
Rattanatay recommended the Lao government to accelerate the pace of publicfinance reform, further improve business environment to promote private sector investment,and produce a skilled labor force to support the labor market demand as these solutions would help spur investment and boost employment andeconomic growth that benefit everyone./.
VNA
