February 11, 2010- The Lao Economy has performed relatively well in the midst of the global financial crisis, as indicated by the lastest Lao Economic Monitor 2009 year-end review. With the cushion from direct external shock due to minimal exposure to global financial system and trade, diverse international market with sustained demand for export, and significant fiscal stimulus by increased on-budget and quasi-fiscal (for the SEA Games and 450th Vientiane Foundation Anniversary)—the Lao economy has reached a growth rate of 6.4%--the 2nd highest in the region after China.
However, the Lao Economic Monitor 2009 year-end review predicts that in the medium term, real GDP is still subject to the global commodity price—with falling trade due to reduced prices and global demand (with the resource sector contributing to majority of the GDP growth). In addition, foreign reserves are expected to decrease in line with decreasing foreign capital inflows and expansionary policy.
Up to 2009, public finance management reforms have shown some progress: the provincial centralization of the Treasury, Customs, and Tax functions; the move towards more sustainable macroeconomic policy; and revision and implementation of various laws including the VAT law and tax law. However, more needs to be done in terms of promulgation and enforcement of these laws.
Also view: Lao Economic Monitor June 2009 (English) (Lao)
Additional view point--Rapid Assessment of Financial Crisis Impacts
The Food, Fuel and Financial Crisis Practice Group of the World Bank and the Lao PDR Country Office organized the first round of rapid assessments (2009) to capture the impact of the economic crisis on individuals and households, and investigate the nature of their responses. A cross-section of over 100 economically-active citizens took part in Focus Group Discussions (FGD) and In-depth Interviews (IDI) in Vientiane, Luang Prabang, and Champasak Provinces including Factory workers, Tuk-Tuk drivers, restaurant and hotel workers, carpenters, tour guides, traders, and returning migrant.
Its findings are not representative or statistically significant, but they complement and enrich more macro and quantitative studies. The finding shows that economic changes during the first half of 2009 have affected vulnerable workers to various degrees ranging from increased hardship to marginal increases in income. Factory and hotel workers, tour guides, female traders, and Tuk-Tuk drivers in Vientiane - experienced increased economic difficulties, while traders and Tuk-Tuk drivers in Luang Prabang have seen only mild negative changes in their economies (despite the low tourist season), and yet other groups such as restaurant workers and carpenters reported increased work and marginal increases in income. (Full Report)