Lao economy faces up to challenges this year

Special Report:Global Financial Crisis

HANOI, Feb. 9 (Xinhua) -- The Lao economy will face up challenges this year despite economic growth rate of 7.9 percent in the 2007-08 fiscal year, driven primarily by increased foreign investment and exports of mining commodities, the Lao newspaper Vientiane Times reported Monday.

According to a report from Lao Ministry of Planning and Investment, the industry sector grew 13.4 percent from the previous year to account for 27 percent of the country's Gross Domestic Product (GDP). The agricultural sector grew by only 3.1 percent, but still covered 29 percent of GDP. The services sector grew 9.9 percent from the previous year.

In the 2007-08 fiscal year, Laos reached one billion U.S. dollars from export revenue, 47 percent of which came from exports of semi-processed minerals including gold and copper. Although exports increased, Laos still has a trade deficit of about 80 million U.S. dollars.

According to Nam Vinhaket Lao Minister of Industry and Commerce, the country's export volume will remain unchanged but value will drop this year.

Investments in hydropower plants, industrial tree plantations and increased tourist numbers also played an important role in achieving the government's economic growth target for the year 2008.

According to a report from the Lao National Tourism Administration, about 1.6 million people visited Laos in 2008, just under the target of 1.8 million, but an increase from 1.3 million in 2007.

The government plans to achieve economic growth of 8 percent in the 2008-2009 fiscal year, but many international financial institutions including the World Bank and the Asian Development Bank believe this target is unrealistic due to the ongoing global financial crisis.

Economists predicted that Laos will experience economic growth of 6 to 6.5 percent. The government has admitted GDP will be lower than expected, but has not yet revised its targets.

In 2009, Lao economy will face a number of challenges as the global economic slowdown has mainly affected every area in the country, including tourism, exports and foreign investment.

To stave off difficulties lying ahead, the government of Laos is keeping a close watch on business operations in the country and will offer assistance to companies that may need to lay off workers this year, said Prime Minister's Office and Government Secretariat Chief Cheuang Sombounkhan.

The government has also urged local banks to offer low interest loans to selected enterprises in an effort to maintain economic growth.

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