Economy expected to slow further
Economy expected to slow further
The economy is projected to grow at a rate of just 6.9 percent this year which is lower than the government's target set at 7.5 percent annually from 2016 to 2020.
A senior economist at the National Economic Research Institute, Dr Leeber Leebouapao, told Vientiane Times yesterday that the slowdown was linked to a number of factors including sluggish exports.
Declining demand around the world has driven down product prices, particularly of commodities like mineral ores and rubber - key exports which generate important income for Laos.
“Commodity exports have declined in both volume and value after being one of the main drivers of the country's economic growth,” Dr Leeber said.
Worse still, most rubber farmers in Laos are struggling to survive due to the declining price of rubber on the world market.
Laos exports most of its rubber to China but it is selling for only 3,000-4,000 kip per kilogramme, down from 9,000 kip per kg in 2012 and 17,000 kip in 2008.
Dr Leeber believed that the import of materials required for the construction of megaprojects had already taken place, so there was little activity this year.
Meanwhile agriculture continues to play an essential role in the nation's economic growth in relation to employment and poverty reduction but this sector has a lower growth rate compared to other sectors.
The government was aware of the fact that the country's growth relied too heavily on foreign investment in the resource sector, which was considered to be unsustainable.
Accordingly, the government planned to develop a sustainable and ‘green' economy. Meanwhile, only a few mega investment projects in the resource sector have been approved or carried out this year.
Furthermore, production for commercial purposes has not progressed as anticipated, and revenue shortfall over the past three years has affected economic development in the country.
Minister to the Prime Minister's Office and Government Spokesman, Dr Chaleun Yiapaoher, told a press conference recently GDP was expected to grow by 6.9 percent this year, but inflation remained low at around 2 percent.
Dr Leeber agreed that despite the economic slowdown, growth remained strong and healthy, saying it was vital to push for greater productivity and further improve the investment climate for people running businesses.
He is optimistic that the average economic growth rate will be 7.5 percent annually over the next five years, driven by megaprojects such as the Xayaboury hydropower project and the Hongsa power plant in Xayaboury province.
Over the past five years, despite the global economic downturn, Laos has seen its economy grow at the rate of 7.9 percent, while the number of poor families has declined significantly.
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).
