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NEWS UPDATES Asean Affairs         1  July 2011

World Bank predicts Lao growth at 8.6 percent

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Laos' economic growth will remain robust this year with natural resources and the manufacturing sector set to be the main driving forces of growth, according to the World Bank's (WB) latest projection.

The bank posts the Lao Economic Update at its web site, which estimates that the real GDP growth of the landlocked nation will reach 8.6 percent in 2011, higher than last year's figure of 8.4 percent thanks to the growing output value of the natural resource and manufacturing sectors.

The garment sector is expected to see 15 to 20 percent growth this year due to the European Union's relaxation of material sourcing requirements which will enable the Lao garment industry to access raw materials from foreign countries to produce more goo ds for the European market.

The services sector shows signs of improvement due to increasing demand for goods and services, in particular in transportation, tourism and retail trading, while the agriculture sector is expected to benefit from the recent increase in regional demand and higher food prices, the WB report states.

According to the bank, the gradual recovery of the global economy and dynamic regional demand means the Lao economic outlook continues to be encouraging, with the economy projected to grow an average of 8 percent annually in upcoming years.

The projection assumes sustained levels of global commodities prices, mainly metals and food, as well as recoveries in the tourism and garment industries. Dynamic demand for Lao exports from Thailand, Vietnam, China and the European Union will boost growth.

The construction of several large electricity power plants, in particular the Hongsa lignite fired power plant in Xayaboury province and the start of full operations at hydropower plants such as Nam Theun 2, Nam Ngum 2 and Nam Lik 1-2, will also add to the growth of the Lao economy.

Although Laos will see robust economic growth, the WB says Laos is experiencing high inflation. The headline inflation rate has increased in recent months due to energy and other non-food commodity prices.

The Lao government has forecast GDP growth of 8.5 percent this fiscal year. Inflation reached 9.24 percent in April, forcing the government to call an urgent meeting of officials to discuss measures to address the issue.

The Bank of the Lao PDR plans to provide low interest loans to farmers to help them to expand production of food and bolster supply in the domestic market.


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