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Macroeconomic stability in Laos amidst uncertainty

The medium-term economic outlook for Laos is favourable but subject to risks, including a volatile global economic environment, according to the latest edition of the World Bank’s Lao Economic Monitor.
The World Bank released the Lao Economic Monitor on Friday.
Economic growth in Laos 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 the service sector were the main drivers of growth in 2018.
The report gives an update of recent macroeconomic developments and has a thematic section on building human capital in order to reduce poverty in Laos.
“Economic growth remains robust in Laos, and the government has made important inroads on the reform front, notably in revenue collection. The path of fiscal consolidation, despite the recent natural disasters is welcome,” said World Bank Country manager for Laos, Mr Nicola Pontara.
“Looking forward, Laos should continue to invest in its human capital to boost productivity, which is key to support both long-term growth and future 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 up from an average of 0.8 percent in 2017, driven by higher average domestic food and fuel prices and the depreciation of the 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 Laos is only 45 percent as productive as he or she could be with full education and healthcare.
Stunting levels among Lao children are higher and the probability of survival to their expected age is lower than in countries with similar income levels.
Despite an average of an actual 10.8 years of schooling by the age of 18, once adjusted for the quality of learning, children in Laos only complete 6.4 years of schooling. The report states that improving human development outcomes in health and education 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 from 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.
The Lao Economic Monitor is published twice yearly by the World Bank office in the Lao PDR.

By Times Reporters
(Latest Update January 21, 2019)

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