Five-year midterm economic growth achieves average rate, despite challenges: Govt

Laos has sustained economic growth over the past two and a half years, which have achieved growth targets, despite ongoing challenges, and economic measures are continuing to gain momentum, the government has told the National Assembly (NA).

The government says measures to reduce inflation are gaining momentum.

Presenting the midterm review report on the five-year National Socio-economic Development Plan for 2021-2025 to the NA on Tuesday, Prime Minister Sonexay Siphandone said midterm average growth reached 4.03 percent, which meets the average growth target of at least 4 percent set in the five-year plan.
Sustained growth was secured despite Laos facing great difficulties and challenges not experienced for years, caused by the domestic, regional and global environment, the premier said.
Industry recorded the highest growth rate of 4.53 percent on average, followed by services, taxes and tariffs, and agriculture and forestry at 4, 3.6, and 3.1 percent respectively.
The service sector recorded the best performance in terms of contribution to gross domestic product (GDP), accounting for 37 percent, followed by industry, agriculture and forestry, and taxes and tariffs at 33.4, 18.4, and 11.23 percent respectively.
Thanks to efforts to restructure revenue and expenditure along with modernising the revenue collection system, revenue collection exceeded the target for two consecutive years.
“And it is expected that revenue collection in 2023 will slightly exceed the targeted plan,” PM Sonexay told the ongoing 6th Ordinary Session of the NA’s 9th legislature.
During the midterm period, 80,704 billion kip in revenue was collected, representing 44.9 percent of the plan and accounting for 15.55 percent of GDP.
Increased revenue coupled with belt tightening that has cut unnecessary spending has narrowed the budget deficit. Debt servicing is also showing positive signs as the government has fulfilled its repayment plans.
“Debt servicing has taken place in line with the times scheduled, which means that our country is not sliding into debt default,” PM Sonexay told the biannual session.   
Measures to bolster foreign currency reserves and reduce inflation are gaining momentum.
The amount of foreign currency earned from exports which entered Laos increased from just 31 percent of total earnings in 2020 to 41.32 percent during the first nine months of 2023. It is expected to rise further to 50 percent for the whole year. 
“This has helped to increase the foreign currency reserves of the Lao PDR so that sufficient funds were available to ensure imports for 4.3 months as of late September 2023, up from just 3.6 months as of late 2020,” the PM told lawmakers.
This figure has already met the five-year target, which was set at a minimum of three months. This achievement has helped mitigate the strong fluctuation of exchange rates and reduced inflation from 40 percent in mid 2022 to 25.69 percent in September 2023.
However, living costs remain high, undermining households’ spending power, while the continuing depreciation of the kip means declining Gross National Income (GNI).
In 2023, GNI per capita is projected at US$1,712, down slightly from US$1,729 in 2022. The GNI figures declined from US$2,161 in 2020 and US$2,004 in 2021 due to the weaker value of the kip.
The government admitted that currency exchange rates remain fragile amid the impacts of the changing global economic environment. Insufficient foreign exchange and debt servicing are also an ongoing issue that require a collective effort to resolve, PM Sonexay said.    
Other key midterm outcomes of the five-year plan include:
M2 annual average growth reached 27.58 percent, above the average five-year target of not more than 20 percent,
Total investment reached more than 153,987 billion kip (75 percent of the five-year plan), of which 123,658 billion kip was local and foreign private investment (124 percent of the plan), and state investment was more than 7,904 billion kip (just 34 percent of the plan),
The trade surplus hit US$1.74 billion and US$1.39 billion in 2021 and 2022 respectively.

By Souksakhone Vaenkeo
 (Latest Update November 3, 2023)