Economic growth in Lao PDR is estimated at 6.5 percent in 2018, down from 6.9 percent in 2017, in part due to the adverse impact of the recent widespread floods. The construction of infrastructure, export of electricity, and service sector have been the main drivers of growth in 2018. The medium-term economic outlook is favorable but subject to risks, including a volatile global economic environment, according to the latest edition of the World Bank’s Lao Economic Monitor, released today.
“Economic growth remains robust in Lao PDR, and the government has made important inroads on the reform front, notably on revenue collection. The path of fiscal consolidation, despite the recent natural disasters, is welcome,” said Nicola Pontara, World Bank Country Manager for Lao PDR. “Looking forward, Lao PDR should continue to invest in its human capital to boost productivity, which is key to support both long-term growth and further poverty reduction.”
According to the report, the fiscal deficit is estimated to narrow from 5.3 percent of GDP in 2017 to 4.7 percent of GDP in 2018. The government is committed to reducing public debt, estimated at around 60 percent of GDP, by following a path of fiscal consolidation, with emphasis on raising revenue collection, tighter control of public spending, and better management of public debt. Inflation is estimated at around 2.1 percent in 2018 from an average of 0.8 percent in 2017 driven by both higher average domestic food and fuel prices and a depreciation of Lao Kip against major currencies.
The report includes a thematic section on human capital, which highlights the importance of investing in people. A child born today in Lao PDR is only 45 percent as productive as she could be if she enjoyed full education and healthcare. Stunting levels among Lao children are higher, and the probability of survival to age five is lower, than those of countries at similar income levels. Moreover, despite an average of actual 10.8 years accumulated in school by age 18, once adjusted for the quality of learning, children in Lao PDR only complete 6.4 years of schooling.
The report concludes that improving human development outcomes in health and education in Lao PDR requires a combination of systemic and sector-specific interventions. For instance, better and greater investments in mother and child health, as well as improved quality of education since early childhood are important interventions to increase the productivity and well-being of new generations. Combined with institutional reforms to improve service delivery mechanisms in health and education, these policies can support the country’s long-term economic prospects.