Lao economy must weather storms of global integration: economist
Lao economy must weather storms of global integration: economist
Laos will face even greater development challenges when it integrates with the global economic community, according to a senior economist.
“The Lao economy is now a part of the global financial system. What happens in the world economy will impact on Laos,” Director General of the National Economic Research Institute, Dr Liber Leebouapao, said yesterday after attending a meeting on the Global Economic Outlook in Vientiane on Wednesday.
The meeting was hosted by the National Economic Research Institute, International Monetary Fund (IMF) and NUOL's Faculty of Economics and Business Management. Local and overseas economists and officials from financial institutions participated in the meeting.
Dr Liber said a global economic downturn would pose a big challenge for economic development in Laos, adding that declining demand in world markets would have a negative impact on the country's export value and productivity.
He said Laos should consider the impact of economic integration and build immunity against any negative impacts of a global economic downturn.
Laos is on track to become a member of the World Trade Organisation next year, which will bolster the country's chances of attracting foreign investment and manufacturing goods for export.
At present, Laos' economic growth relies on the export of mining products, hydropower and agricultural products. But the prices of minerals and agricultural products have been volatile over the past five years due to uncertainties about global economic growth.
In 2011, the value of mineral exports amounted to US$812 million, comprising US$676 million worth of copper and US$111 million worth of gold, accounting for nearly 10 percent of GDP. Laos also exported US$75 million worth of electricity, as well as agricultural and forestry products worth US$171 million, coffee valued at US$17 million, wood products worth US$27 million, and other goods worth US$24 million.
According to a presentation from the IMF, many emerging market and developing economies have done well over the past decade despite the global economic downturn, in comparison to more advanced economies. This gives Laos an advantage and has opened up opportuni ties to focus on exports to developing nations.
While there is reason for optimism, one major challenge is that no expert can predict when a developing economy can maintain a strong economic performance. Recent good performance has been supported by factors which are fickle, such as strong capital inflow, rapid credit growth, and high commodities prices, according to the IMF presentation.
There is significant risk that advanced economies could experience another downturn and in such an event em erging market and developing economies will likely end up recoupling with advanced economies such as they did during the global financial crisis, the IMF reported.
In developing economies, vulnerabilities could also reemerge as strong credit growth in some emerging market and developing economies, which raises concerns about financial stability.
vientiane times
