As a result of the effects of the Covid-19 pandemic, Laos’ Gross Domestic Product (GDP) is expected to rise by only 3.3 percent in 2020 – the lowest rate in three and a half decades, according to a new estimate.
Tourism, manufacturing, and state revenue collection are all in decline, according to a report on the economic impact of Covid-19 issued by the National Economic Research Institute.
The report is to be presented at the government’s monthly cabinet meeting today.
Economic growth of only 3.3 percent is forecast for this year under the report, the lowest rate in over thirty years since Laos began its economic shift under the “new thinking” market-oriented economic policy of 1986.
The Lao government’s socio-economic development plan for 2020 had originally projected growth of 6.5 percent for 2020, but the impact of Covid-19 will have a substantial effect on the economy for the foreseeable future.
To combat negative economic effects, the government has laid out policies and measures to reduce and defer the payment of tax, customs, and other administrative fees during the coronavirus outbreak, and lowering the basic interest rate charged by the Bank of the Lao PDR.
Commercial banks will be asked to extend the time required to repay loans and are to reduce interest rates charged to businesses.
The National Taskforce Committee in charge of economic affairs will begin mulling medium and longterm measures to stimulate the economy and boost the private sector as well.
Meanwhile, the National Economic Research Institute has made suggestions for ways to assist low-income earners and day laborers, as well as the unemployed.
It has also suggested the government adjust the state budget in line with a drop in revenue, and begin to reform state enterprises such as Electricite du Laos and various state banks, which are underperforming and burdening the state.
Meanwhile, the institute recommends the government promote greater investment in tourism, easier access to finance by businesses, especially small and medium enterprises, and further production of goods for export to help the economy recover.
It advised the government to use tourism downtime wisely by investing in the sector in preparation for future tourism by upgrading tourist attractions and boosting services to ensure they meet international standards.
The report suggested improved logistics and transportation connectivity, including the Laos-China railway, which could significantly improve the facilitation of exports.
The institute says digital services could play a large role in the future of Laos if investment in digital platforms for e-commerce and e-governance could be introduced, noting that Lao people have already had to adjust to teleconferencing and working from home during the Covid-19 lockdown period.
Improved digital platforms could assist the government in revenue collection via online tax payments, helping to regulate the flow of money within the economy.