Laos Country profile

laos.jpg

Growth has averaged 7½% over the last decade supported by the large run up in global commodity prices, electricity exports to Thailand, Vietnam and Cambodia and strong credit growth. Growth in 2017 dipped below 7% as robust electricity exports and construction activity was offset by tighter credit conditions and fewer tourist arrivals

Growth is expected to remain high at around 7% over the coming years supported by new hydropower projects and strong foreign investment from China in agriculture, manufacturing and services. Greater ASEAN integration will give Laos access to some 600m consumers. But the regulatory and procedural changes needed to conform with the ASEAN agreements will require structural adjustments, which could have significant costs in the near term—especially as infant industries in Laos start to compete across ASEAN. Favourable demographics will support growth over the long run; but infrastructure shortfalls and regulatory deficiencies could stymie this.

Figure

Per capita income has risen strongly over much of the last 15 years consistent with the strong expansion in the economy. Laos recently gained lower-middle-income status but remains classified as a least developed country by the UN. The UN looks at more than just per capita incomes as it includes quality of life and the structure of the economy when assigning LDC status.  An IMF study shows that the poverty rate has halved from 46% in the early 1990s to 23% in 2013. But 70% of the population remains engaged in subsistence agriculture, and a big shift into manufacturing and services is needed to lift standards of living decisively.

Figure