November 10, 2023
VIENTIANE – The Lao economy continued to grow at an average of 4 percent annually over the past few years, though the quality of growth was not high due to the depreciation of the kip.
This was stated by the Minister of Planning and Investment, Mr Khamjane Vongphosy, while responding to a lawmaker’s question at the ongoing session of the National Assembly in Vientiane regarding progress in implementing the target for economic growth and measures to curb inflation.
“The weak kip has resulted in a decline in per capita GDP from US$2,595 in 2021 to US$1,824 in 2023,” Mr Khamjane said, adding that indeed the government plans to increase the figure to US$2,880 by 2025.
These figures indicate that people’s incomes have declined in real terms amid the rising cost of living.
The minister said depreciation of the kip is one of the main factors driving inflation and soaring prices, which is having a severe impact on people’s standard of living.
Economic growth reached 3.5 percent in 2021 and 4.4 percent in 2022. The growth rate is projected at 4.2 percent in 2023 and 4.5 percent next year.
However, the inflation rate averaged 33.69 percent over the past nine months, although it dropped from 41.26 percent in February to 25.69 percent in September.
The government had hoped to reduce inflation to 9 percent by the end of this year, but its attempts could fail, so the government has set the same target for 2024.
In addition, Mr Khamjane said the kip had dropped in value by 18.4 percent against the US dollar in September compared to the figure recorded at the end of 2022.
The government has pledged to stabilise exchange rates to slow inflation and increase foreign currency reserves, to help the country overcome the challenges it faces.
The minister acknowledged that the government will need to do more to tackle economic and financial difficulties and prevent the country from being dragged into default in its debt repayments.
“In recent years, the government has attempted to improve the quality of state services, create job opportunities for local people to alleviate their poverty, and build infrastructure needed to facilitate agricultural production and income generation for local people,” Mr Khamjane said.
In recent decades, Laos’ economic growth has depended heavily on the exploitation of natural resources, with several mining operations producing minerals for export.
But economists say the exploitation of natural resources to boost growth is not sustainable and the country will suffer when natural resources are depleted.
Economists also say the government needs to improve the business climate to attract more high-quality investment so that the economic base can be diversified.
In this context, Laos must build a knowledge-based economy but this will be possible only if the workforce acquires a new range of skills.