Strong economic growth in Laos?
The Asian Development Bank recently released the "2017 Asian Development Outlook" and introduced a country report on Laos in Vientiane, the capital of Laos. The report believes that the steady economic growth of Laos this year and next will benefit from the expansion of power production and sales, the strong growth of the service industry, and the support of the construction of the China-Laos railway.
According to the report, in 2016, the service industry in Laos grew by 9.0%, the industry grew by 8.0%, and the agriculture grew slightly by 2.5%. The report predicts that due to more active domestic economic activities and higher oil prices, the inflation rate in Laos may gradually rise, from 1.6% last year to 2.5% this year and 3.0% next year.
The Lao government set an economic growth target of 7% this year, the highest growth rate in East Asia and the Pacific. The US "Forbes" website published a Ralph Jennings column at the end of March, commenting on the World Bank's estimate of the five fastest-growing economies in East Asia and the Pacific. Laos ranked first.
So, where does the strong growth momentum of the Lao economy come from?
Laos' overall economic growth is in good shape
The World Bank’s report in the second half of 2016 pointed out that economists and private owners believe that despite the uncertainty in the overall global economy, Laos’ overall economic growth is in good shape and can reach the 7% economic growth target, but the Lao government needs Strengthen management in macroeconomics, prices, promotion of investment and business environment.
Forecasts and judgments cannot be comprehensive. They can only be based on the main aspects of an economy. The national budget is the country’s basic fiscal plan. It reflects the country’s guidelines and policies, and reflects the development of the national economy and various undertakings. The scope and direction of government activities.
The 2017 budget plan of Laos still uses a moderate deficit to drive growth. At the same time, because fiscal revenue growth has not met expectations in recent years, and expenditure has grown rapidly, Laos has strengthened frugality in 2017 and opposed extravagance and waste. It has proposed that expenditure should be based on income capacity to ensure that the government and various departments must work with savings while working. From a perspective to reduce unnecessary expenditures.
The Lao government plans to achieve a fiscal revenue budget of 23.801 trillion kip (approximately US$2.89 billion) in 2017, and budget expenditure of 32.262 trillion kip (approximately US$3.917 billion); a deficit of 8.461 trillion kip (approximately US$3.917 billion) is expected to occur. (Approximately US$1.027 billion), equivalent to 6.25% of GDP.
Bright prospects for power development and ASEAN integration
Laos is generally a sparsely populated country with a land area of 237,000 square kilometers and a population of about 7 million. On the one hand, the market is relatively small and the labor force is small, making it unsuitable for the development of processing industries. On the other hand, the per capita resources are relatively rich, including Minerals, hydropower and land resources are relatively abundant. According to statistics from the World Bank, in the past 10 years, the average growth rate of Laos’ GDP has been 7%, of which industries using the country’s natural resources (mainly water, minerals and forests) contributed one-third of the growth.
Laos is a low- and middle-income, developing country with a small economy. Its GDP in 2016 was 13.76 billion U.S. dollars. The poor accounted for about 23% of the total population, and the average life expectancy was 66 years. The Laos economy relies significantly on resource development, which has caused the Laos economy to be greatly affected when the price of bulk commodities fell in the previous years; in recent years, the country’s bulk commodity prices have changed little, and the prices of some forest and mineral products have increased. The negative factors have been eliminated, and Laos has vigorously developed The power industry has a significant effect, which directly supports economic development.
The World Bank believes that due to the development of the power industry and the advancement of ASEAN integration, as a series of power stations are completed and put into operation, the economic development prospects of Laos are broadly optimistic, and the fiscal deficit, trade deficit and foreign debt will gradually narrow.
In fact, the "Forbes" article's comments on the Laotian economy briefly focused on the above points, saying that due to the investment in the power industry and the deepening integration of the ten ASEAN countries, the Lao economy will grow by 7% this year. This landlocked country with a population of approximately 7 million is improving its power grid in order to provide electricity and exports to another 10% of households by 2020.
China's impetus that cannot be ignored
In recent years, the visibility of the Chinese factor in Laos’s market has increased significantly, which also means that the economic ties between the two countries have become increasingly close, that is, there has been considerable Chinese motivation in Laos’ high level of development in recent years.
In terms of engineering contracting, although Laos is only an economy of more than 10 billion U.S. dollars, the value of China’s engineering contracts with Laos in 2016 reached 6.71 billion U.S. dollars, an increase of 30.1% over 2015. It is second only to Malaysia and Indonesia among ASEAN countries. Ranked third.
In terms of trade, according to the Lao Vientiane Times report on December 3, 2016, the total bilateral trade between Laos and China will exceed US$2 billion that year. According to data released by the Import and Export Trade Department of the Lao Ministry of Industry and Trade, the total bilateral trade between Laos and China has exceeded US$1.5 billion in the first nine months of the 2015-2016 fiscal year. Among them, the total export value of Laos to China is 950 million U.S. dollars, and the total import value is 570 million U.S. dollars. China has become Laos' second largest trading partner, second only to Thailand.
In terms of investment, China is the largest source of foreign capital in Laos. As of May 2016, China has invested in 760 projects in Laos with a total investment of more than 6.7 billion U.S. dollars. Especially since 2011, it has invested in more than 160 projects with a total investment of more than 2.75 billion U.S. dollars. China's investment in the old covers a number of fields, with the most investment in power, mining, agriculture, and service industries.
In addition, compared with previous years, the international economic situation and domestic social and economic development that Laos faced in 2017 did not change much, there were no obvious negative factors, and there were many positive factors, especially the start of the construction of the China-Laos railway that has attracted attention. Related investment has gradually increased and attracted investment related to the infrastructure industry, which is undoubtedly good news for the Lao economy.