Tightening Demand to Maintain Macroeconomic Balances : Lao PDR Economic Monitor, November 2012

World Bank

Tightening Demand to Maintain Macroeconomic Balances : Lao PDR Economic Monitor, November 2012

2012

World Bank

Global and regional economic development continues to face uncertainties in 2012. East Asia and the Pacific region's growth is estimated to slow down compared to 2011, but remains robust compared with other regions thanks to sustained domestic investment and consumption. Lao PDR continues to maintain robust growth this year but faces a challenge to manage domestic demand. On the supply side, the construction, services, industry and agriculture sectors are the main drivers of growth; while on the demand side, public spending and private investment including demand driven by preparations for the Asia-Europe Meeting (ASEM) has played an important role in boosting the economy this year. In spite of robust growth, inflation has been declining, mostly on account of declining food and fuel inflation. However, home-grown and external risks associated with low reserves coverage, increased exposure to mining revenues, fast banking expansion with limited supervision capacity and a large number of newly announced large investment projects warrant close monitoring to preserve macroeconomic stability and sustainable growth. Stronger than expected revenue performance from the mining sector and external grants contributed to an improvement in the fiscal performance in FY11/12.With the contribution of mining revenue increasing, closely monitoring commodity price fluctuations is becoming increasingly important. The fiscal deficit in FY12/13 is expected to slightly widen as a result of a planned wage increase. Strong pressure on external reserves calls for tightening of aggregate demand. Credit growth remains high and is putting pressure on falling reserves. Credit growth has picked up in June 2012 driven by increased credit to the private sector and SOEs. Private sector credit growth is driven by buoyant performance in construction, manufacturing and service sectors. The Bank of Lao PDR's disbursements to local infrastructure projects have moderated compared to their peak in 2009, but are ongoing as a result of previous commitments.

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AGROVOC Keywords

agricultural sector agriculture balance of payments commercial banks consumers debt servicing diversification domestic consumption economic development economic growth empowerment entrepreneurs equipment ethnic groups exchange rate expenditure exports external debt farm enterprises farmer farmers financial analysis foreign investment gender gender equality gender equity gender mainstreaming gold gross domestic product growth rate household food security households human capital human resources imports income income tax inflation instrument legal system liquidity living standards local government maturity natural resources nutrition population growth private investment public debt public finance public investment real estate returns social development surplus surpluses telecommunications trade policies union value added village villages wages world trade organization wto

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World Bank, Vientiane

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Supply side; Agriculture organization; Empowerment of women; Positive spillover; Cash transfer; Weak demand; Gender assessment; Disbursements; Receipts; Aggregate demand; Current account deficit; Endowments; Debt repayment; Economic developments; Foreign asset; Public spending; Foreign reserves; Public borrowing; Export commodity; Balance of payment; Export performance; Real effective exchange rate; Trading partners; Strong demand; Surplus country; Imports of consumption; Consumption levels; Gdp; Bond; Non-performing loan; Institutional support; Creditors; Public debt management; Uncertainties; Consumer goods; Consumption goods; Foreign currency; Farming households; Gender issues; Consumer price index; Gender inequality; Trade policy; Key challenge; Macroeconomic stability; Treasury; Debt stock; Exporters; Support infrastructure; Expenditures; Total revenue; Total credit; External shock; Banking sector; Floating exchange rate regime; Currency exchange; Portfolio; Price indexes; Growth performance; Gender relations; Borrowing; Inflation rate; Portfolio investment; Credit growth; Reserves; Npl; International reserves; Public offerings; Debt management; Private sector credit; Gender gaps; Income level; Trading; Deposits; Annual growth; Fiscal deficit; Competitive advantage; Economic crisis; Securities; Bank debt; Economic life; Access to education; Competitiveness; Real gdp; Domestic demand; Technical assistance; Capital account; Fiscal operations; Agricultural output; Foreign exchange reserves; Risk of debt; Domestic debt; Foreign exchange; Price fluctuations; Human development; Slowdown; International markets; Legal reform; Core inflation; Vulnerable groups; Government revenues; Government bonds; Comparative advantage; Gold price; Information system; Investment plan; Investment projects; Woman; Economic opportunity; Job creation; Securities exchange; Exposure; Current account; Government policy; Turnover; Capital base; Regional markets; Bank office; Bond issuance; Deposit; Economic reforms; Global economy; Fixed rate; Exchange rate stability; Advanced economies; Exchange rate intervention; Oil price; Trade integration; Job opportunities; Floating exchange rate; Interest payment; Commodity price; Credits; Foreign currencies; Commodity prices; Foreign investors; Government investments; World trade; Economic outlook; Development bank; Capital goods; Loan; Debt service; Non-performing loans; Treasury bill; Retail trading; Foreign direct investment; Fiscal deficits; Growth rates; Foreign assets; Capital goods imports; Business training; Repayments; Local infrastructure; Monetary fund; Commercial borrowing; Export earnings; Infrastructure investments; Financial information; Economic opportunities; Debt sustainability; Public external debt; Effective exchange rate; Capital inflows; Total imports

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http://hdl.handle.net/10986/13812http://creativecommons.org/licenses/by/3.0/World BankCC BY 3.0 Unported

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Tightening Demand to Maintain Macroeconomic Balances : Lao PDR Economic Monitor, November 2012

2012

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