Laos Country profile

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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 2018 fell below 7% driven by softer agricultural and mining output. Growth is expected to average around 7% over the coming years supported by new hydropower projects, the rail project into China and strong foreign investment from China in agriculture, manufacturing and services. Greater ASEAN integration will give Laos access to some 600 million 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.

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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 (LDC) 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.

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