Covid wave alters economic outlook for Laos, World Bank says


The World Bank predicts that Laos’ gross domestic product (GDP) growth will increase to 3.6% this year, from 0.5% in 2020. XINHUA NEWS AGENCY

The Lao economy is on track for moderately improved growth in 2021, despite a Covid-19 epidemic that began the promising economic recovery at the start of the year, according to the World Bank.

The Bank’s latest Economic Observatory for Laos – A Path to Recovery – predicts that gross domestic product (GDP) growth will reach 3.6% in 2021, up from 0.5% in 2020.

This forecast is down from the 4% growth projected in March 2021 and depends on various assumptions, including economic recovery in neighboring countries, acceleration of vaccination rates and mitigation of community epidemics of the virus on the rest of the year.

Growth could fall further if the Covid epidemic worsens and strong lockdowns persist, or if Laos again experiences repeated natural disasters such as floods, droughts or outbreaks of livestock disease, according to The report.

Agriculture and industry are behind much of the growth, with agricultural exports increasing, while exports of electricity, mining and manufacturing have rebounded from the slowdown in trade. last year.

However, in tourism, hospitality, transportation and other services, bottlenecks and persistent restrictions on international travel mean that most businesses are struggling, depriving the country of a major source of income.

The World Bank’s new country director for Laos, Alex Kremer, said: “Laos is doing well to contain the coronavirus and have the entire population vaccinated.

“However, the risk of debt distress, a low kip and low government revenues continue to limit the government’s options to revive the economy. Reforms that stimulate private investment, tax payments and trade would help in this area. “

According to the report, the decline in the value of the kip leads to an increase in inflation, which in turn has raised concerns about access to food and basic items. This problem is particularly pressing for the urban poor.

In a thematic section, “Impacts of Covid-19 on businesses and households”, the report shows that employment fell sharply in May this year, while more than 30% of family businesses have closed since the start of the pandemic.

Business surveys conducted by the World Bank show that monthly sales fell 48% from March to April 2021. Almost half of all businesses reported cash shortages, and more than a quarter of businesses s ‘expect to go into debt over the next six months. .

To mitigate the effects of the economic slowdown, the report recommends that Laos accelerate trade reforms and trade facilitation so that it can properly benefit from new infrastructure and trade agreements.

This can be achieved by streamlining current investment regulations and procedures, increasing the ease of doing business, reducing transportation and logistics costs, and supporting improvement in product quality, especially for retailers. agricultural exports.

Expanding government support programs for businesses, as well as better promotion of these support programs, would help businesses stay afloat and provide vital incomes and revenues, while measures to help further Laotian companies to invest in digital technologies or new delivery methods could help companies turn crisis into opportunity, according to the report.

The Lao Economic Monitor is published twice a year by the World Bank.


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