A tourism site in Laos (Photo: traveldailymedia.com)Vientiane (VNA) – Economic expansion of Laos is forecast tocontract this year for the first time since 1980s due to impacts of theCOVID-19 pandemic, but the economy will recover in 2021, according to the AsianDevelopment (ADB)’s recent report.
The Asian Development Outlook (ADO) 2020 Update predicts Laos’ GDP to contractby 2.5 percent in 2020, marking its first negative economic growth since 1986-1987.The growth is expected to rebound to 4.5 percent in 2021, suggesting a slowrecovery as the pandemic outbreak is said to subside slowly.
ADB Country Director for Laos YasushiNegishi said the COVID-19 outbreak has not only affected the economic growth in2020 but also hampered the government’s prospect to collect revenues.
The Lao government needs to improve macro-fiscal framework and acceleratepublic finance reform to create more fiscal space to buffer shocks, hestressed.
The bank’s report also shows thatagriculture would grow at 1.9 percent this year, slower than the 2.5 percentprojected in April due to lower rainfalls, while the industrial sector growthis projected at 1.4 percent for the whole year.
The service sector is said to post minus 5.5 percent growth as tourist arrivalsfalling by 60 percent in the first half of this year and expected to ceasealtogether, and contraction in wholesale and retail trade, transportation andhospitality.
Disruption of FDI inflows will shrink all investments in the country by 17.5 percent.
The inflation rate in the nation will increase to 5.5 percent this year,sparked by higher food prices and Lao Kip depreciation. For the first half ofthe year, Kip exchange rate depreciated by 1.6 percent against the US dollar inregulated commercial banks rate, and by 5.7 percent on the parallel marketrate.
Inflation in 2021 is projected to ease to 4.5 percent as food prices areexpected to fall thanks to a better harvest.
The current account deficit is expected to narrow this year more than earlierprojected on the back of lower oil prices and lower demand for imports, as wellas higher electricity exports, but will widen again in 2021./.
VNA
