IMF optimistic about robust growth of Lao economy
IMF optimistic about robust growth of Lao economy
The International Monetary Fund (IMF) believes the Lao economy will continue to grow at a strong pace by implementing policies that will ensure its growth is sustainable.
However, the Fund warns that Laos will require a gradual fiscal consolidation, with a focus on better revenue collection and improvements in the compos ition of spending, to make sure that the public debt burden can be gradually reduced, making public finances more sustainable.
A senior economist from the National Economic Research Institute, Dr Leeber Leebouapao, told Vientiane Times on Friday that he agrees with the IMF's recommendat ions, saying that it is vital to pursue financial principles and ensure that revenue collection achieves targets while ensuring that the state budget is spent in effective ways.
“The new Minister of Finance is working on this issue,” Dr Leeber said, saying that stronger measures are required to address financial leaks.
“In the short term, we need to ensure that our currency does not appreciate, because if that happens it will directly impact our export sector.”
Dr Leeber said that in the long term, Laos will have to push for productivity and work harder to bolster the export sector, which is considered to be one of the main drivers of economic growth.
The IMF recommends that Laos diversifies exports to take advantage of economic integration with its neighbours, saying that improving the business climate and strengthening the monetary policy framework will also help lay the foundation for continued robust growth going forward.
Generally the IMF recommended that policymakers in the region should deploy macroeconomic policies to boost demand if needed. But more importantly, structural reforms will be key to support economic transitions and the emergence of new growth models.
This will bolster regional potential growth and, ultimately, strengthen the region's resilience to global shocks. Structural reforms and policies, particularly fiscal policy, should also tackle long-standing challenges, such as rising inequality, which will help make growth more inclusive.
Over the past five years, despite the global economic downturn, the Lao economy grew at 7.9 percent and the number of poor families 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 much on foreign investment in the resource sector, which is considered unsustainable.
The government forecasts that the economy will continue to grow by not less than 7.5 percent over the next five years, which will be driven by mega investment projects.
“I think the Lao economy will continue to grow at the rate of 7.5 percent given that many mega pr ojects have begun and are progressing as anticipated,” Dr Leeber said.
