Solid growth expected for Laos this year and next: ADB

Gross domestic product (GDP) growth for Laos is forecast to reach 6.9 per cent in 2017 and 7.0 per cent in 2018, a slight increase from the 6.8-per-cent growth recorded in 2016, according to the ADB’s flagship annual economic publication, “Asian Development Outlook 2017”, which was released in Vientiane on Thursday.
“Despite fiscal constraints and weaker global demand for minerals in recent years, the Lao economy remains one of strong performers in the region with an average growth above 7.0 per cent for the last decade,” ADB country director Yasushi Negishi said.
The services sector posted strong growth of 9.0 per cent, supported by wholesale and retail trading, hotels and restaurants, financial services and telecommunications.
Industry also maintained sturdy growth of 8.0 per cent, though mining output declined slightly. 
This sector was boosted by higher electricity generation, notably at the Hongsa lignite-fired power plant, and the development of residential and commercial buildings.
Growth in agriculture edged up from 2.0 per cent in 2015 to 2.5 per cent in 2016 due to improved weather in the latter part of the year.
The current account deficit slightly improved from 16.8 per cent of GDP in 2015 to 14.1 per cent in 2016, but is projected to widen to 19 per cent this year and 20 per cent next year, due to expected large imports of construction materials and machinery for the Laos-China railway.
Foreign exchange reserves are unlikely to see much improvement soon. Better commodity prices, an expanding services sector, construction workers on the Laos-China railway, power plants, commerce and real estate will help strengthen growth in 2017 and 2018.
Expected stronger domestic economic activities and higher oil prices resulting in rising inflation will put pressure on the trade balance. 
Inflation is likely to rise gradually, from 1.6 per cent in 2016 to 2.5 per cent in 2017 and 3.0 per cent in 2018. 
A development challenge for Laos is how to make growth more inclusive and poverty reduction keep pace with the rate of economic growth. 
ADB public management specialist Rattanatay Luanglathbandith said the rates of economic growth and poverty reduction were inconsistent.
“To stimulate and boost the rate of poverty reduction, the government should encourage employment at industrial production bases or value-added chains,” he said.
ADB’s economists also stressed that diversifying the sources of growth toward more labour-intensive manufacturing and services is key to making growth more inclusive.