LAO PEOPLE’S DEMOCRATIC REPUBLIC

NATIONAL ROUND TABLE PROCESS

Macroeconomics

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

Overview

Lao PDR has continued to grow strongly over the last year, but not without challenges. GDP growth in FY14/15 is projected at around 7.5 percent, a slight deceleration compared to earlier years; but nonetheless a formidable achievement in the current external environment.

The slight deceleration of economic activity has been influenced by lower prices for commodities, unfavorable weather conditions affecting output in agriculture, as well as some fiscal consolidation and moderating in credit growth.

The country took further welcomed steps towards fiscal consolidation, yet the situation requires ongoing careful attention. According to preliminary budget execution numbers, the deficit in FY14/15 was around 4 percent of GDP, below the target deficit of 5.2 percent of GDP. Revenues fell slightly below target, but still grew by 6 percent from the last fiscal year.

The authorities continued to tightly manage the exchange rate with the kip depreciating by only 1.11 percent against the US$ in FY14/15. While this helped keep inflation manageable and limited risks in the financial sector, it also translated into a strong appreciation against regional currencies and may have further challenged the competitiveness of domestic production and limited foreign exchange reserve accumulation.

For further information please see the Sector Working Group progress report