Lao economy feels impact of Chinese slowdown
Lao economy feels impact of Chinese slowdown
Laos has begun to feel the impact of the economic slowdown in China as it is a key trading partner, an expert has observed.
A senior economist at the National Economic Research Institute, Dr Leeber Leebouapao, told Vientiane Times on Friday that Laos exports a number of agricultural products to China and the ongoing slowdown in that country has resulted in China importing fewer crops.
“This is especially true in the rubber sector. The slowdown in China has resulted in a slump in the price of rubber in China and that country is considered one of the main markets for our rubber,” he said.
“Our farmers have severely suffered from the declining price of rubber. Some have even sold their farms as they have lost everything after planting rubber trees and cannot repay the interest on bank loans.”
Dr Leeber acknowledged that the impact of China's slowdown on Lao agriculture was worsening, but said it would not significantly affect the overall growth of the Lao economy.
“China is not in a crisis situation yet,” he said, adding that there was still demand from China for Lao products.
One of the most significant points to note is that the Lao economy is driven by mega investment projects which are mainly operated by entrepreneurs from China, Vietnam and Thailand.
“I think our economy will continue to grow at the rate of 7.5 percent or down a little bit given that many mega projects are underway and progressing as anticipated,” Dr Leeber said.
However, there is no official report as to whether Chinese investment in Laos is declining.
China has set its 2016 growth target at 6.5 to 7 percent, Governor of the Chinese central bank Zhou Xiaochuan told Chinese media recently.
The bank governor said China's economy will have room for growth, even though the elimination of outdated production capacity has become a policy priority. China now seeks growth by relying more on domestic demand, while exports are not able to contribute to growth the way they used to.
Managing Director of the International Monetary Fund Christine Lagarde visited Laos last week and cautioned that China's transition to a more balanced growth path has led to a slowdown in growth that has also had an impact on the global economic environment.
The IMF chief explained that Asia and Asean countries are not immune to these developments and will be affected by global growth slowing and China rebalancing.
Over the past five years, despite the global economic downturn, the Lao economy has continued to grow and the number of poor families has declined significantly.
The value of Gross Domestic Product (GDP) has reached 102,320 billion kip (US$12.8 billion) with GDP per capita climbing to 15.8 million kip (US$1,970).
However, this growth has relied too heavily on foreign investment in the resource sector, which is considered unsustainable.
