In the latest Lao Economic Monitor released on April 26, 2024, several key findings shed light on the current state of the country's economy. The report highlights various challenges and opportunities that Laos is facing as it strives for economic growth and stability.
According to the report, economic growth in Laos remains below 2019 levels due to macroeconomic instability. The Gross Domestic Product (GDP) grew by 3.7% in 2023, with positive contributions from sectors such as tourism, transport, logistics, and mining. However, high inflation caused by the depreciation of the kip has led to reduced spending on health and education for many households, especially low-income families.
One of the major challenges mentioned in the report is the depreciation of the kip and high inflation, which have had a significant impact on domestic prices. As stated in the report, "Headline inflation averaged 31% over 2023 and remains high, with food, transport, hotel, and restaurant price increases the main contributors."
The report also touches upon the changing dynamics of the labor market in Laos, with more workers moving abroad and shifting from service jobs to agriculture and manufacturing. This shift has been accompanied by labor shortages in some sectors, as mentioned in the report: "Workers are also shifting from wage jobs and unpaid family work to self-employment and family businesses. Labor shortages have appeared in some sectors."
In terms of public finances, the report highlights the challenges posed by high public debt levels and the deficit in the fiscal balance. Despite improved revenue collection, the overall fiscal balance is estimated to be at a deficit of 0.2%. The report also mentions the impact of debt repayments on the economy, with public debt remaining above 110% of GDP in 2023.
Looking ahead, the report projects a real GDP growth of 4% in 2024, constrained by structural challenges. The economy is expected to benefit from investments in the power sector, special economic zones, and the recovery of sectors like tourism and transport. However, growth is expected to remain below pre-COVID levels due to macroeconomic instability and structural constraints.
In conclusion, the report emphasizes the importance of implementing critical reforms to restore macroeconomic stability and promote growth. These reforms include measures to boost spending on social sectors, manage public debt, strengthen financial sector stability, and improve the business environment. Additionally, investing in human capital and education is seen as crucial for sustainable growth and development in Laos.