Paths to Recovery in Laos: Restore Economic Stability, Increase Inclusion, and Strengthen Resilience


Critical near-term challenges for Laos include restoring macroeconomic stability, improving economic inclusion, and protecting its people against environmental and economic shocks, according to a new World Bank report.

The Lao PDR Systematic Country Diagnostic 2021 Update, released today, lays out three pathways that the country can follow to address its most pressing economic challenges: ‘Stabilize’ as a precondition for economic growth and protecting people’s well-being; ‘Share’ to enhance inclusion and social cohesion; and ‘Sustain’ to strengthen economic, social, and environmental resilience.

“Laos needs economic growth based on job-creation, rather than on borrowing and the sale of natural resources”, says Alex Kremer, World Bank Group Country Manager for Laos.

“The immediate priority is to increase state revenues. Otherwise, with debt payments growing each year, there will be less money available to invest in education, skills, local infrastructure and health – the sources of healthy economic growth.”

The report, informed by a series of World Bank diagnostic reports, including the recently released Lao PDR Country Economic Memorandum, shows that three major challenges facing the country have been amplified by the pandemic: macroeconomic instability, jobless growth with rising inequality, and vulnerability to climate change, environmental degradation and shocks.

These problems are exacerbated by weak governance and institutions. As well as the three broad pathways for economic recovery – Stabilize, Share, and Sustain – the report, therefore, identifies the cross-cutting objective of strengthening national institutions and governance systems.

The report also details 16 development objectives, some of which will appear in the World Bank Group’s next Country Partnership Framework. These include improving fiscal space, reducing stunting, and increasing agricultural productivity.

The report’s recommendations focus on boosting job creation through a more dynamic private sector and better connective infrastructure. At the same time, to help Lao people access job opportunities, the country needs improvements in the labor market, in education, and in health services.

To make progress viable in the long run, further attention should be paid to natural resource management, to including climate change considerations in all planning, and to urbanization.