Country Report Laos December 2008

Outlook for 2009-10

There is little prospect that the ruling Lao People's Revolutionary Party (LPRP) will face a serious challenge to its authority in 2009-10. As inflation decelerates in 2009, the main challenge facing the LPRP will be to prevent popular protests as the economy slows. No major change in the LPRP's ideology or policies is likely during the forecast period. The government will continue to pursue economic reforms, and will remain keen to attract foreign investment. Although efforts to join the World Trade Organisation may provide some impetus for reform, progress overall will be slow. Economic growth will average 5.5% a year in 2009-10, down from 7.5% a year in 2007-08. Consumer price inflation will fall to 4.3% in 2009, from an estimated 8.6% in 2008. The current account will remain in deficit, owing to the deficit on the merchandise trade account and to the repatriation of profits and dividends by the foreign-invested mining sector.

The political scene

The prime minister, Bouasone Bouphavanh, has reshuffled the cabinet following the death of the mining and energy minister, Bosaikham Vongdara. The National Assembly (the legislature) has debated legislation affecting, among other things, state contracts, investment and mining. Land titling remains a contentious issue. Ethnic Hmong from the Huay Nam Khao refugee camp in northern Thailand have continued to return.

Economic policy

The government has dismissed speculation that it is preparing to raise taxes. Officials have said that there will be no increase in income tax or customs duties, despite concerns over the fiscal deficit following an increase of 20% in civil servants' salaries. The government's reforms of the business environment have had little success, according to a World Bank report, which said that Laos was the second most difficult country in the region (after Timor-Leste) in which to conduct business.

The domestic economy

Annual inflation slowed by more than 1 percentage point in September, falling to 8.5%, down from 9.6% in August, according to the Department of Statistics. The decrease was mainly owing to lower fuel costs. A Malaysian-based budget airline, AirAsia, has announced that it will now fly to Laos daily, compared with thrice weekly previously.

Foreign trade and payments

Exports to Thailand, the country's main export market, were down by 14.7% year on year in October. Cambodian imports from Thailand were up by 23.8%.

This report covers the following industry codes:
SIC Code: 60;70;15;53;59;10;49;47
NAICS Code: 52;72;23;44;212;22;48