Lao PDR’s GDP growth in 2020 is expected to slow sharply due to the economic fallout from the COVID-19 pandemic.

The fiscal deficit in 2020 is expected to widen above the budgeted target as the government rolls out measures to bolster health systems and provide direct support to households and businesses. After moderating in 2019, investment and credit growth is expected to remain sluggish this year due to lockdown measures and tighter border controls.

Providing sufficient fiscal support is key to mitigating the impact of the COVID-19 pandemic and to restart the economy toward a robust growth. At the same time, building up international reserves remains crucial to buffer against external shocks. Diversifying the economic base by leveraging on the resource sector to develop the manufacturing, tourism and agro-based industries will improve the country’s economic resilience.

The report also includes three topical issues pertaining to Lao PDR’s long-term growth: (i) Development of Tourism Industry and Economic Impact; (ii) Inflation Dynamics and Exchange Rate Pass-Through; and (iii) Development and Reform of Electricity Sector.