Economic growth in the Lao People's Democratic Republic (PDR) has been below 2019 levels and is expected to continue at a slow pace in 2024, according to a report released by the World Bank. The report, titled "Accelerating Reforms for Growth," highlights various factors contributing to the subdued growth in the country.
The World Bank stated that Lao GDP grew by 3.7% in 2023, with positive contributions from sectors such as tourism, transport, logistics, and mining. However, challenges such as economic instability, low worker skills, out-migration of labor, and a challenging business environment have hindered the growth potential of the country. In comparison, growth stood at 5.5% in 2019.
Alex Kremer, the World Bank Country Manager for the Lao PDR, noted that despite some improvements in average household incomes, a significant portion of Lao households, particularly low-income families, are facing challenges due to inflation. He emphasized, "Our monitoring surveys show over 30% of families have reduced their spending on health and education, while in urban areas where fewer people grow their own food, food security is becoming an increasing problem."
Looking ahead to 2024, the report projects a GDP growth of 4% with expected benefits from services growth and investments in the power sector and special economic zones. However, the country is likely to continue facing issues such as kip depreciation, high inflation, and the need to repay high external debts.
The report also highlights concerns regarding debt management and the need for reforms in critical areas such as revenue mobilization, public investment management, financial sector stability, and business environment reforms. It stresses the importance of accelerating the pace of reform to restore macroeconomic stability in the country.
Additionally, the report addresses the decline in public education funding in Laos, emphasizing the importance of prioritizing education to ensure sustainable high-growth trajectory for the country. It highlights challenges in the education sector, including a decrease in primary education accessibility and low learning outcomes in secondary education, especially in mathematics and science.
In conclusion, the World Bank report underscores the need for comprehensive reforms and focused efforts to address the economic challenges faced by Laos and pave the way for sustainable growth in the future.