Revenue from tourism, foreign investment, and exports will help Laos’ struggling economy grow by 4% in 2024, according to the International Monetary Fund’s forecast.
However, this growth won’t be sufficient to mitigate the persistently high inflation rates, which have pushed many Laotians to the brink of poverty, as reported by several Laotians to Radio Free Asia.
A resident of Saravane province stated, “People in rural areas are still relying on food from forests as they don’t have the money to buy food from the market. They can only afford the essentials.”
Another resident from Xieng Khouang province expressed concerns that if the government fails to control inflation, nobody will benefit from the economic growth. He said, “People are becoming poorer day by day and live paycheck to paycheck. Most products and merchandise sold in the markets are imported.”
The Asian Development Bank (ADB) also predicts a 4% expansion in the Lao economy next year and had previously forecasted a growth rate of 3.7% in 2023.
However, an ADB official informed RFA that the inflation rate will remain at 28% year over year, the same as 2023.
Price controls and wage increases
Inflation has soared to as high as 40% in recent years due to depreciation in the Lao currency and declines in foreign investment.
Earlier this year, Lao authorities implemented price controls on necessities like pork, rice, and natural gas. The government has also raised the minimum wage multiple times since 2022 to address the cost of living crisis.
Last week, Lao Prime Minister Sonexay Siphandone acknowledged at a conference in Vientiane that the economy has been sluggish due to high debt levels, inflation, high gasoline prices, and other factors.
However, the ADB official believes that economic growth in Laos will strengthen as tourism, exports, and service industries recover from the COVID-19 pandemic, along with investment from neighboring Thailand, China, and Vietnam resuming.
While the IMF forecast was released on Oct. 18, an updated prediction will be available next month after officials review more export and tourism data.
An IMF representative stated, “One issue is that the currency is still fluctuating. This needs to be resolved quickly for the macroeconomy to stabilize.”
The government must also attract more foreign investment, motivate locals to increase production for exports, and reduce imports to achieve more consistent growth, according to the representative.
Translated by Sidney Khotpanya. Edited by Matt Reed.