LAO PEOPLE’S DEMOCRATIC REPUBLIC

NATIONAL ROUND TABLE PROCESS

Macroeconomics

The Ministry of Planning and Investment chairs the Macroeconomic Working Group. The Asian Development Bank (ADB) and World Bank (WB) are Co-Chairs.

Overview

Economic growth in Lao PDR moderated to 7 percent in 2016 and a projected less than 7 percent in 2017. Flat output in mining, stronger control on public spending, lower tourist arrivals and moderating credit growth were partly offset by increased power generation capacity, higher agriculture production and output in manufacturing, especially from two special economic zones.

The moderating economic activity derailed the fiscal consolidation in 2016; prompting a stronger response in 2017. The fiscal deficit in FY15/16 widened to 6.2 percent of GDP as revenues plummeted. The authorities have since introduced measures to support revenues and control spending; however, the deficit is expected to remain elevated. Public debt is estimated to have further increased to almost 67 percent of GDP by mid-2017. This stresses the importance to stay on the course of the fiscal consolidation plan adopted by the National Assembly in late-2016 and strengthen public debt management.

Monetary conditions remain unchanged, the exchange rate has been more flexible in 2017 while parts of the financial sector continue to be exposed to significant risks. There were no major changes to the monetary policy instruments as inflation pressures remain low and growth rate of credit stabilized around 15 percent yoy in real terms. Greater flexibility in the exchange rate during 2017 helped reverse some of the appreciation in recent years and may lower pressures on foreign reserves. using the full flexibility of the +/- 5 percent band can help balance the exchange rate stability objective with competitiveness concerns. Parts of the financial sector remain undercapitalized while the quality of the loan portfolio deteriorated slightly. The ongoing restructuring of two state-owned banks and the revamping of the legal and regulatory framework for the sector should help lower risks. 

For further information please see the Sector Working Group progress report 

Documents:
Key issues for macro-economic management

Presentations (June 2017):
Lao Economic Performance
Investment Environment in Laos
Current Business Environment in Laos
Directions and Prospects for Growth
Public Finance Management Reform in Lao PDR
What is debt management and why is it important

SWG secretariat contacts

  • Ms. Sisavanh Didaravong, Deputy Director General, Department of Planning, MPI, Tel: 020 2220 1602
  • Mr. Soulinthone Leuangkhamsing, Senior Economist, ADB Lao Resident Mission Vientiane, Tel: 020-5400 4888