Laos to face sharply decline in remittances

Remittances in Laos are projected to decline by about 50 percent in 2020 as a result of the economic crisis triggered by the COVID-19 pandemic, a senior economist has noted.
The Chairman of the National Assembly’s Planning, Finance and Audit Committee and senior economist Dr Leeber Leebouapao told Vientiane Times yesterday that the remittances form a major part in Lao economy and poverty reduction efforts.
“More than 100,000 Lao migrant workers have returned home as a result of the COVID-19 epidemic,” he said.

“A majority of Lao labourers work in Thailand and the rest work in South Korea and Japan. We still have some labourers working in other countries, but there are not many so the projected fall in Lao remittances would be the sharpest decline in recent decades.”
According to the latest edition of the World Bank’s Lao Economic Monitor unveiled in June this year, the economic shock due to COVID-19 is adversely impacting the flow of remittances and could push as many as 214,000 people into poverty in Laos.
The WB stated that since the outbreak, many thousands of Lao workers have returned, resulting in an estimated reduction of up to US$125 million or 0.7 percent of GDP in remittances in 2020.
Around 9 percent of households in Laos receive remittances from abroad, and remittances constitute 60 percent of their household income, according to the World Bank report.
The significant reduction in recipient household incomes could result in an increase in the poverty rate in Laos. The poverty is expected to rise by 1.4 to 3.1 percentage points in 2020.
“The impact of the pandemic on poverty is expected to linger, with poverty projected to return to its pre-crisis level in 2021 under the upside scenario, or later than 2022 under the downside scenario,” said the World Bank report.
Remittances constitute the money sent home by individuals working abroad to their family and friends. Most Low-income countries, including Laos depend on remittances to boost their gross domestic product (GDP) growth.
In 2020, the global remittances are estimated to drop by 20 percent due to the Covid-19 crisis. The remittance sent to East Asia and Pacific grew by 2.6 percent in 2019 and is expected to drop by 13 percent this year.
A majority of Lao migrants regard remittances as an important source of income for their families, and many of them send money back home every month.
Recipient families used remittances to build houses, sending children to schools and paying for healthcare.
Nevertheless, the country’s lockdown early this year hindered economic activities in Laos, affecting the flow of domestic remittances and income of local people.
In March and April, Lao workers severely suffered from the shutdown of factories, restaurants, shops and other business units, induced by the city lockdown and the Lao-Thai border closures.

By Somsack Pongkhao
(Latest Update August 18, 2020)