Lao People’s Democratic Republic
Briefing Notes for the Launch in Vientiane, March 2008
Economic growth
- Economic growth in the Lao People Democratic Republic decreased between 2006 and 2007 from 8.3% to 7.0%, exceeding the 6.2% average growth rate for the South-East Asian region that year
- GDP growth is forecast to increase to 8.1% in 2008
Inflation and monetary policy developments
- Inflation is estimated to have decreased from 6.8% in 2006 to 4.6% in 2007
- However, at the end of November fuel prices rose by around 30%
- There is a risk that higher fuel prices will push up fertilizer costs and drive up the price of rice and other foodstuffs during 2008
- The kip appreciated 6% against the dollar during the first three quarters of 2007, compared to the same period in 2006, putting some downward pressure on domestic price inflation
- A major challenge of the Bank of Lao People’s Democratic Republic is to keep money supply growth under control amid large increases in international reserves
- The inflation is expected to edge up to 5% in 2008
Exchange rates and foreign exchange reserves
- The exchange rate appreciated to an average of 9,300 K/USD in the first three quarters of 2007 from an average of 10,250 in the first three quarters of 2006
- Foreign exchange reserves increased by two thirds between the end of the third quarter of 2006 and the end of the third quarter of 2007, from US$ 290 million to US$ 485 million.
External sector
- Exports increased 13% year-on-year during the first nine months of fiscal year 2006/07
- The main export products included minerals and hydropower, garments, wood products, coffee, agricultural produce, and cattle meat
- While Thailand remains the main market, exports to China and Viet Nam are expanding rapidly
- Between 2001 and 2007 China became the largest source of investment in Laos, followed by Thailand
- In fiscal year 2006/07 the Committee for Planning and Investment approved 45 Chinese projects worth US$ 462 million in hydropower, mining, rubber plantations, telecommunications, construction materials, hotels and restaurants
- Viet Nam is the third largest source of investment in Laos, and recently proposed to invest US$ 1.7 billion in oil exploration and a hydroelectric plant that would be the largest in the country
- Tourism revenue is increasing fast: in the first ten months of 2007 the country received 1.3 million people, a 31% increase with respect to the same period in 2006
