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Publication | 14 January 2021

Lao PDR Economic Monitor (January 2021) Supporting Economic Recovery-Thematic section: Livelihoods in the Time of COVID-19

The COVID-19 outbreak has intensified the growth slowdown, plunging Lao PDR’s economy into its first recession since the Asian financial crisis in 1998. The World Bank estimates that Lao PDR’s growth will decline drastically in 2020 to −0.6 percent. The pandemic has mainly affected laborintensive service sectors and those linked to global and regional value chains, having an especially negative effect on tourism-related services, wholesale and retail trade, and manufacturing. It has affected livelihoods and poses a serious risk to Lao PDR’s progress on poverty reduction. The poverty rate (measured as $3.2 a day, 2011 PPP) is expected to increase by at least 1.7 percentage points in 2020, as compared with a non-COVID-19 scenario. The sharp drop in domestic revenue mobilization has led to worsening of the fiscal situation and a growing debt problem. Under the baseline scenario, Lao PDR’s GDP growth rate is projected to rise to 4.9 percent in 2021, assuming that the domestic spread of the virus is brought under control, that the government’s small but targeted COVID-19 fiscal support measures are implemented effectively, and that there are no new interruptions to the global economy recovery. The anticipated recovery will be supported by investment in infrastructure, and growth in services, exports, and private consumption. However, risks are tilted heavily to the downside, as unpredictable evolution of the pandemic and therefore its threats to macroeconomic stability could delay the resumption of regular economic activity. Under the downside scenario, which assumes some of these risks are realized, the growth rate is estimated to rebound to only 2.8 percent in 2021.

Lao PDR Economic Monitor (January 2021) Supporting Economic Recovery-Thematic section: Livelihoods in the Time of COVID-19
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