Economic recovery in Laos, region slow due to pandemic

Economic recovery in East Asia and the Pacific, including in Laos, has been undermined by the spread of the Delta variant of Covid-19, prolonging distress for firms and households, the World Bank said on Monday.
 Economic activity began to slow in the second quarter of 2021, and growth forecasts have been downgraded for most countries in the region, according to the World Bank’s East Asia and Pacific Fall 2021 Economic Update.
 

GDP growth in Laos is projected to rebound to 2.2 percent in 2021, up from 0.5 percent in 2020. This forecast has been revised downwards from the 4 percent growth projected in March 2021 due to the recent Covid outbreak, according to the EAP update.
 “The agriculture and industry sectors are expected to drive growth, supported by external demand – as key trading partners gradually recover. However, the sluggish recovery of services is expected to weigh on growth,” the World Bank stated.
 The economy is expected to gradually recover in the medium-term, but growth will remain below pre-pandemic levels in 2022, reflecting the impact of both cyclical and structural factors on the economic outlook.
 The World Bank forecasts that Laos’ economy will grow by 4.5 percent in 2022 and 4.8 percent in 2023.
 The report highlighted that the economy of China (one of Laos’ main trading partners) is projected to expand by 8.5 percent in 2021 and 5.4 percent in 2022.
 Meanwhile, economic growth in Asean member countries will gradually recover from the current stagnation, with Thailand projected to grow at 1 percent in 2021 and 3.6 percent in 2022.
 The projected growth rate in Vietnam is 4.8 percent in 2021 and 6.5 percent in 2022; in Cambodia (2.2 percent in 2021 and 4.5 percent in 2022); Malaysia (3.3 percent in 2021 and 5.8 percent in 2022); and Indonesia (3.7 percent in 2021 and 5.2 percent in 2022).
 The World Bank’s Vice President for East Asia and the Pacific, Manuela Ferro, said “The economic recovery of developing East Asia and Pacific faces a reversal of fortune.”
 “Whereas in 2020 the region contained Covid-19 while other regions of the world struggled, the rise in Covid cases this year has decreased growth prospects for 2021. However, the region has emerged stronger from crises before and with the right policies could do so again.”
According to the report, the Delta variant is spreading because pre-vaccine containment strategies are proving insufficient, and vaccination rollout has been slow.
In the pre-Covid-19 vaccine era, many countries in the region were able to contain the virus by imposing short periods of stringent restrictions on domestic and international mobility and then transitioning to intensive testing, tracing and isolation.
This approach proved very effective and was implemented with varying degrees of success in Cambodia, Laos and Vietnam, and less so in Indonesia and the Philippines.
 East Asia and Pacific Chief Economist Aaditya Mattoo said “Accelerated vaccination and testing to control Covid infections could revive economic activity in struggling countries as early as the first half of 2022, and double their growth rate next year.”
“But in the longer term, only deeper reforms can prevent slower growth and increasing inequality, an impoverishing combination the region has not seen this century,” he added.

By Somsack Pongkhao
(Latest Update September 29, 2021)