Financial Services

Maintaining Economic Stability In Lao PDR

(KPL) Economic growth in the Lao PDR is projected to rebound to 6.5 per cent in 2019, up from 6.3 per cent in 2018.

Growth is expected to be driven by the construction sector, supported by investments in large infrastructure projects, and a resilient services sector, led by wholesale and retail trade growth.

Against the backdrop of challenging domestic and external environments, the government has remained committed to fiscal consolidation by tightening public expenditure and improving revenue administration, according to the lasted edition of the World Bank’s Lao Economic Monitor, released today, Aug 12.

Fiscal consolidation is expected to result in a decline in the budget deficit to 4.3 per cent of GDP in 2019 down from 4.4 per cent last year, driven by tighter control of the public wage bill and capital spending. This is expected to keep public expenditure stable at around 20% of GDP in 2019.

The revenue to GDP ratio is projected to improve slightly in 2019 thanks to efforts to strengthen revenue administration and the legal framework. Looking forward, public debt is expected to decline from 57.7% of GDP in 2018 to 55.5 % of GDP in 2021. Outlook until 2021 is subject to increasing downside risks.

Strengthening revenue collection is important to create fiscal space and reduce the burden of public debt, said Nicola Pontara, World Bank Country Manager for the Lao PDR.

Looking forward, it will be important to improve the business environment to support private sector development, including the growth of small and medium enterprises. These measures can contribute to maintaining a stable macroeconomic environment, promoting job creation and reducing poverty and inequality, said Nicola Pontara.

The report includes a thematic section that summarizes the perceptions of small and medium enterprises (SMEs) on the business environment, based on the data of World Bank Enterprise Survey.

The key constraints reported by SMEs include access to finance, competition with informal firms-such as those that are not registered and do not comply with regulations -and electricity outages. The report maintains that strengthening the performance of SMEs can improve the quality of jobs, raise incomes and contribute to the greater well-being of the Lao people.

Source: Lao News Agency