World Bank: Laos to record US$1 billion trade deficit in 2012
World Bank: Laos to record US$1 billion trade deficit in 2012
Laos will rack up a major trade deficit this year due to a surge in imports required for the construction of facilities for the Asia-Europe Meeting Summit in November.
According to the East Asia and Pacific Economic Update 2012, the World Bank's mid-year economic forecast, imports will reach about US$4.1 billion this year while the value of exports will be about US$3 billion, resulting in a trade deficit of about US$1 billion.
The large trade deficit will result from Laos' preparations to host the ASEM Summit, with 48 heads of state and government from Asia and Europe expected to attend the historic event.
The government eases restrictions on companies importing construction materials to build the infrastructure and facilities required to host the Summit.
The World Bank report also shows that Laos' current foreign reserves are worth US$681 million, up from US$679 million in 2011. However, the current foreign reserves can secure the importation of goods and services for only 1.9 months, down from 2.2 months in 2011, due to the increasing value of imports.
Economists say the increasing import value is positive because it is not due to growing public consumption but increasing foreign investment, particularly in real estate projects, which require construction materials and furniture to be imported.
A World Bank report shows that foreign direct investment in Laos will reach US$1.5 billion this year, up from US$1.1 billion in 2011.
The World Bank report also notes that the Lao government continues to maintain a stable exchange rate between the kip and major foreign currencies.
In the first six months of the 2011-12 fiscal year (Oct 2011-Mar 2012), the kip appreciated by 0.3 percent against the US dollar due to strong demand and inflows of foreign exchange associated with investments and export receipts.
The kip also appreciated against the Thai baht by one percent during the same period, mostly because of the depreciation of the baht against the dollar.
Credit growth in the private sector slowed in 2011 after a rapid expansion over previous years. Credit growth fell from almost 34 percent year-on-year in 2010 to 23 percent in 2011.
However, lending to state owned enterprises increased moderately in 2011 from 12.4 percent in 2010 to almost 15 percent year-on-year in 2011, partly due to loans to Lao Airlines to finance the purchase of two Airbus aircraft. Non-performing loans are reported to have declined to 2.2 percent in 2011 from 3.2 percent in 2010.
vientiane times
