VIENTIANE (Vientiane Times/ANN): Laos’ economy is poised for moderate expansion this year and next, driven by external demand linked to tourism and trade, according to a recent report by the Asian Development Bank (ADB).
The Asian Development Outlook for April 2024 projects that Laos’ gross domestic product (GDP) will grow by 4 percent in both 2024 and 2025. This growth will be supported by external demand, particularly in the services sector. Notably, international tourist arrivals are expected to rise to 4.2 million in 2024, benefiting from improved rail and road links.
Additionally, foreign investment in renewable energy projects, including the Monsoon Wind Power Project, is set to drive moderate industrial growth, with completion expected in 2025.
Despite economic growth, the Asian Development Bank has said the persistently rising inflation rate, the weak kip, and public debt remain significant challenges for further development.
ADB Country Director for Laos, Sonomi Tanaka, highlighted the economy’s continued moderate recovery in 2023, driven by services such as tourism and trade.
“However, pressure from unsustainable debt and high inflation has persisted, dampening the country’s overall pace of economic recovery,” she added.
Inflationary pressures are expected to persist as businesses raise prices to offset higher costs resulting from currency depreciation and wage increases. Consumer prices are projected to rise by an average of 20 percent in 2024, gradually moderating to 7 percent in 2025.
The inflation rate in Laos stood at 24.9 percent in March, marking a 1.3 percent increase from February and a 25 percent surge compared to the same period in 2023, according to the Lao Statistics Bureau.
The Asian Development Bank stated that rising inflation, which has driven up the price of food and hotel and restaurant services, has outpaced wage growth, leading to a decline in household purchasing power.
The decline in purchasing power among households has significant implications for the future of the Lao economy. More students may drop out of school, and labour migration may increase as people seek employment opportunities elsewhere, the ADB said.
To address these challenges, the government is collaborating with development partners to expand social assistance programmes, enhance health services, and invest in clean water and sanitation. Vientiane Times/ANN
