Study highlights positive dimensions of Lao economy

Some positive features of the Lao economy have been reported in the first six months of this year, despite the global economic slump and worldwide uncertainty, according to a study.
Economic activities stalled when Laos went into full lockdown on March 30, prompting companies to lay off workers and shutdown their factories.
Business kicked off again after the Prime Minister’s Office issued a notice on May 30 to gradually loosen lockdown measures, allowing more business units to reopen.
According to the macro-economic assessment report unveiled by the National Economic Research Institute recently, job vacancies announced by firms increased in June and July after the lowest employment rate recorded in April.
However, the employment rate is still lower than the figure recorded in the same period last year.
The volume of exports has started to increase slightly since June when authorities intensified efforts to facilitate cross border freight between Laos and its neighbours.
Tourism is among the sectors hit the hardest by the coronavirus pandemic since no foreign visitors were reported in the second quarter of this year, resulting in the 60 percent decline of foreign visitors in Laos in the first six months.
Nevertheless, the government is deepening the promotion of the Lao-visit-Laos campaign to boost spending in the domestic industry and minimise the impact from a drop in international visitors.
The value of new business operations approved by authorities increased by 7.1 percent in the first six months of this year, compared to the same period of the previous year.
Service sectors, including banking, telecommunications and other state services are getting better despite the border control within the country.
Commercial banks and financial institutions have been urged to delay loan repayments of both principal and interest in responding to the economic slowdown.
Over the past five months of this year, the loans provided by commercial banks to entrepreneurs grew by 7.5 percent compared to the same period last year. Laos is basically vulnerable to external impacts, ranging from Covid-19 pandemic, China-US trade tension as well as natural disasters.
As a result, the value of exports and foreign investments declined significantly over the first six months of this year, affecting the country’s foreign currency reserves and inflation rates.
The National Economic Research Institute has forecast that the inflation rate in Laos is expected to stay at roughly 5 percent for 2020 which will be driven by food category, medicine, clothes, and other household items.
Another challenge for Laos is the rising unemployment rate after many thousands of Lao migrant workers returned home as a result of the virus outbreak.
The unemployment rate is projected to rise from 9.4 percent in 2017 to 20 percent in 2020.
Government sectors have been urged to assist Lao workers to ensure they can be employed in various investment projects. The government sectors also need to help businesses to boost their productivity for export and overcome challenges facing their plans.

Somsack Pongkhao
(Latest Update August 19, 2020)