Economic growth in Lao PDR is projected to rebound to 6.5 percent in 2019, up from 6.3 percent in 2018, according to the latest edition of the World Bank’s Lao Economic Monitor.
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 of Lao PDR has remained committed to fiscal consolidation by tightening public expenditure and improving revenue administration.
Fiscal consolidation is expected to result in a decline in the budget deficit to 4.3 percent of GDP in 2019 down from 4.4 percent in 2018, driven by tighter control of the public wage bill and capital spending.
This is expected to keep public expenditure stable at around 20 percent 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 57.2 percent of GDP in 2018 to 55.5 percent of GDP in 2021.
The 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 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.”
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.
Economic decline, along with a restrictive lockdown, left the freight sector in a vulnerable situation.