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Friday, October 11, 2024

Lao economic growth projects at 4 percent, inflation remains key challenge: IMF

 

Economic activity in Asia and the Pacific, including Laos, remains on track to contribute around two-thirds of worldwide growth in 2023 despite global economic challenges, according to a Press Briefing of the regional economic outlook for Asia and Pacific held in Singapore on October 18, 2023. 

Growth in Asia and the Pacific is set to accelerate from 3.9 percent in 2022 to 4.6 percent this year, unchanged from the projection in last April. This is largely explained by the post-reopening recovery in China and stronger-than-expected growth in the first half of the year in Japan and India. “The Asia and Pacific region thus remains a relatively bright spot compared to 3 percent expected global growth this year. 

Growth is projected to moderate to 4.2 percent in 2024. The slowdown in China’s property sector will weigh on demand throughout the region,” the IMF stated. Though Laos is facing economic challenges, ranging from skyrocketing inflation, continuing depreciation of the Lao kip and high debt owed to other countries, the IMF maintained next year’s economic growth forecast for Laos at 4 percent. 

The projected growth for Thailand (Laos’ main trading partner) is 3.2 percent in 2024, 5.8 percent for Vietnam, 6.1 percent for Cambodia, 5 percent for Indonesia, 4.3 percent for Malaysia, and 2.6 percent for Myanmar. 

According to the IMF, China’s economy is expected to expand by 5 percent in 2023 and by 4.2 percent in 2024. Compared to the April 2023 World Economic Outlook, this is a downward revision of 0.2 and 0.3 percentage points, respectively. 

This reflects mainly the renewed weakness in China’s property sector, despite more policy support than previously assumed. “We have lowered our estimate for regional growth next year to 4.2 percent, from the 4.4 percent projected in April. 

IMF Asia and Pacific Department Director, Krishna Srinivasan, was asked about the recent increase in fuel prices. Srinivasan explained that IMF conducted a global analysis which revealed that a 10% increase in oil prices results in a 2.15% decline in global output the following year and a 0.4 percentage point increase in inflation. As Laos is an oil importing country, the impact is likely to be more significant. However, it is important to note that there are many other factors contributing to the growth forecast.

It is also critical to note that disinflation is on track in Asia, with inflation now expected to return to central bank target ranges next year in most countries. However, inflation has risen in Japan, where the central bank has twice tweaked its yield curve control policy settings to manage risks to the outlook.

 Inflation in Laos remains high. One of the main challenges for Laos in the coming months is to curb inflation, as the current rising cost of goods and services is creating extra hardship for people already struggling to rise above poverty. The inflation rate in Laos rose more slowly in September at 25.69 percent, down from 25.88 percent recorded in August, according to a report from the Lao Statistics Bureau. 

Inflation in Laos was driven by three main factors – weak domestic output and heavy reliance on imports, continuing depreciation of the kip, and the rising price of imported goods.

FM90 reporter

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