Lao PDR’s growth projected to decline due to COVID-19 impact in 2020

The economic downturn has particularly affected the service sector, according to the latest edition of the World Bank’s Economic Monitor for Lao PDR: Lao PDR in the Time of COVID-19, released today.

Lao PDR’s economic growth is projected to decline in 2020 due to the impact of the COVID-19 pandemic and measures to contain its spread, to 1 percent in the baseline scenario and negative 1.8 percent in a lower-case scenario. The economic downturn has particularly affected the service sector, according to the latest edition of the World Bank’s Economic Monitor for Lao PDR: Lao PDR in the Time of COVID-19, released today.

The impact of the COVID-19 pandemic is also projected to increase the fiscal deficit in 2020 to between 7.5 and 8.8 percent of GDP, from 5.1 percent of GDP in 2019. Consequently, debt levels are expected to increase to between 65 and 68 percent of GDP in 2020, from 59 percent of GDP in 2019. Reserve buffers are expected to fall in 2020 and cover less than one month of imports.

“During these challenging times, it is important to alleviate the impact of the economic downturn on households and firms,” said Mariam Sherman, World Bank Country Director for Myanmar, Cambodia and Lao PDR. “Looking forward, reducing the heavy burden of external debt and undertaking macroeconomic reforms will help Lao PDR build a more resilient economy to cope with shocks.”  

The COVID-19 shock will also have a significant impact on the labour market and poverty. A sharp drop in the performance of the travel, tourism and hospitality sectors – which account for 11 percent of total employment and 22 percent of employment in urban areas – has caused widespread job losses. Between 96,000 and 214,000 additional people are estimated to fall into poverty as a result of the pandemic, jeopardizing past gains.

The report also includes a thematic section on Building Resilient Health Systems. Evidence shows that Lao PDR needs to invest more in building a resilient health system to effectively respond to health emergencies. At the same time, it is important to ensure that adequate resources continue to be available to provide quality essential health services to all citizens.

The Lao Economic Monitor is published twice yearly by the World Bank Office in Lao PDR.