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FEATURE STORY

Lao PDR Economic Monitor, May 2012: Sustaining Robust Growth, Mitigating Risks and Deepening Reforms

July 2, 2012

KEY FINDINGS

  • Lao PDR’s 2012 economic outlook is positive, with development soaring in construction, manufacturing, mining, and services. These sectors are expected to drive a projected growth of 8.3% in 2012. Despite this robust growth, the medium-term outlook remains subject to uncertainty in external markets.
  • Declining rice prices and slower increase of fuel prices drove down overall inflation during the past months.
  • The 2011/12 budget features increased exposure to hydropower and mining revenues and slower growth in non-resource sector revenue.
  • Along with anticipated higher fiscal expenditures, the overall fiscal deficit will deteriorate, together with non-resource and non-mining fiscal deficits.
  • The overall balance of payment is projected to slightly improve in 2012, as a result of augmented foreign direct investment and transfers outside the resource sectors.
  • The non-resource sector’s external balance deficit is expected to improve due to investment inflows and transfers. Meanwhile, the resource sector’s balance of payment surplus is expected to moderately decline due to higher income repatriation in the mining sector. 
  • In 2011, the National Assembly approved the revised General Tax Law.  In effect, this introduced a transparent, turnover-based presumptive tax regime for businesses with a turnover below the VAT registration threshold. This revision eliminates minimum business tax.
  • Lao PDR continued to make progress in its process of acceding to the World Trade Organization, concluding bilateral negotiations with the European Union and the United States in late 2011 and with Ukraine, the last bilateral negotiation, in May 2012.