IMF comments on Lao economy

The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation* with the Lao People's Democratic Republic in late January.

Real GDP growth is expected to moderate from 7.5% in 2015 to 7% in 2016. Domestic activity has slowed following a less favorable external environment, and credit growth has also moderated from a high level, the IMF said. While the overall banking system is well capitalised, state-owned bank balance sheets show signs of weakness, with rising non-performing loans (NPLs) and weak capital and profitability.

Inflation is expected to remain low and stable at around 2% at end-2016, aided by a strengthening kip exchange rate. As growth continues to moderate in the near-term, inflation is projected to remain in low single digits.

A failure to consolidate the fiscal position and bring down public debt could undermine confidence in the government’s macro policy framework, raise public debt further and worsen the external position. The economy is also exposed to external shocks, notably a further regional growth slowdown and a deterioration in terms-of-trade and capital inflows.

Executive Directors commended the authorities for their strong macroeconomic performance and progress on poverty reduction despite economic challenges. Directors noted, however, that there are significant vulnerabilities in the external, fiscal, and financial sectors, and that risks to the outlook could materialise from a regional growth slowdown, tightening in global monetary conditions, and capital flow volatility. Against this background, Directors emphasised the need to resume fiscal consolidation, tighten monetary conditions with gradually increased exchange rate flexibility over the medium-term, strengthen financial sector supervision, and introduce reforms to support economic diversification and private sector development. 

Directors noted the rise in NPLs and the under-capitalisation of state-owned banks. To safeguard macro-financial stability, they recommended promptly addressing NPLs, phasing out regulatory forbearance, strengthening sound lending practices and supervision, and recapitalising the state-owned banks. Directors emphasised the importance of addressing supervisory weaknesses and developing a crisis management framework. They also welcomed the Anti Money Laundering/Countering Financing of Terrorism (AML/CFT) law, and encouraged full implementation of the action plan as agreed with the Financial Action Task Force.

Directors welcomed progress on product and labour market openness and gains in poverty reduction. To support more inclusive and broad-based growth, they encouraged further reforms aimed at diversifying the economy, boosting private sector activity, and improving the business climate. In this context, trade integration and improvements in education and health infrastructure were encouraged. Enhancing financial deepening and financial access by small and medium-sized enterprises (SMEs) would also support macro stability and growth.

Interested?

View selected economic indicators for Laos, including projections for 2016 to 2018

*Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

Road quality to improve in Laos

The Lao Ministry of Finance and the World Bank have signed a US$25 million agreement to further strengthen road maintenance systems and improve road connectivity throughout the country.  Lao PDR is one of the ASEAN countries most vulnerable to floods, droughts and storms with local transport infrastructure particularly exposed due to the climate-related increase in the frequency and intensity of natural disasters.

“Our partnership with the World Bank on road maintenance has resulted in better and safer roads. With this new agreement, people in rural areas will benefit from more reliable roads throughout the year,” said Dr Bounchanh Sinthavong, Minister of Public Works and Transport.

The new Lao PDR Road Sector II Project is part of the country’s national programme to build climate-resilient roads and infrastructure. The project will support road maintenance work in six provinces that are highly vulnerable to flash floods, landslides, and other natural disasters - Phongsaly, Houaphan, Oudomxay, Xiengkhouang, Xayabouly and Bolikhamxay. This will provide year-round access to basic services, schools, and markets for around 1.6 million people, the World Bank said.

Said Ulrich Zachau, World Bank Country Director for Southeast Asia, “Better roads will help prevent disaster-related road closures, ensuring better connectivity and access to income opportunities and basic social services.”

The new financing comes from the International Development Association, the World Bank’s fund for developing nations. The programme is also supported by funds from the Government of Lao PDR and the Nordic Development Fund. The World Bank has been supporting roads in Lao PDR since the 1990s.

Interested?

Read the WorkSmart Asia blog post about what the World Bank is doing for roads in Lebanon

SilkAir adds Laos to route network

SilkAir, the regional wing of Singapore Airlines, has launched its inaugural flight to Vientiane and Luang Prabang, Laos. With this launch, SilkAir’s route network now spans 51 destinations in 14 countries.

The inaugural flight departed the afternoon of 31 October at 1.20pm from Singapore's Changi Airport and arrived at Vientiane’s Wattay International Airport at 3.15pm. It then departed at 4.05pm for Luang Prabang International Airport, where it then arrived at 5pm. The return flight took off at 5.50pm and landed in Singapore at 10.05pm (all times local).

The thrice weekly flights to Laos are scheduled on Mondays, Thursdays and Saturdays, with same-day return. The services will be operated with Airbus A320 aircraft, featuring both business and economy class cabins.

SilkAir’s Chief Executive Foo Chai Woo said: “We are very excited to launch this new flight, as the popularity of Laos grows among travelers of the region and beyond. The air link will be the latest addition to the Singapore Airlines–SilkAir network covering over 100 international cities in 34 countries, providing our customers with enhanced connectivity through our Singapore Changi Airport hub. We hope that travellers will delight in the serene nature of Laos and all its vibrancy in culture and architecture.”



Interested?

Flights are available for booking through the SilkAir website, call centres and travel agents.

MI flight schedule (with effect from 31 October 2016):

Flight	Routing	Operates	Departure (Local timing)	Arrival (Local Timing)
MI788	Singapore to Vientiane	Mon, Thu, Sat	Singapore 1:20pm	Vientiane 315pm
MI788	Vientiane to Luang Prabang	Mon, Thu, Sat	Vientiane 4:05pm	Luang Prabang 5pm
MI788	Luang Prabang to Singapore	Mon, Thu, Sat	Luang Prabang 5:50pm	Singapore 10:05pm

Two Asian hotels make it to Lonely Planet's list of extraordinary hotels

Source: Mihir Garh website.

Businesses looking for a new venue to wow stakeholders can get ideas from Lonely Planet's list of the most extraordinary hotels in the world. Hotels in the UAE, Australia, Laos and India are included.

At number one is Mihir Gahr, Rajasthan, India, which took 150 masons, artisans and craftsmen two years to build. "This is not just a unique place to stay; it’s a shrine to the artistic and architectural traditions of Rajasthan in general and Jodhpur in particular,” says James Kay, Editor, Lonely Planet.

Qasr Al Sarab, United Arab Emirates at number four in the list, is another extraordinary hotel, where museum-quality artifacts in the library come from a time when the area's few residents were date farmers or Bedouins. The sense of history is palpable, with Lonely Planet author Lisa Dunford talking about meeting a fourth-generation falconer.

To stay at Peppers Cradle Mountain Lodge, the fifth-most extraordinary hotel in the world, to "plunge.. into the heart of Tasmania’s wilderness", according to the list. Tantalisingly, Lonely Planet Writer and Editor Anita Isalska says: "Wildlife is best viewed from an outdoor hot tub."

Last but not least is The Gibbon Experience Treehouse at Bokeo Reserve, Laos, in position ten, for those with a head for heights. The beds are a hundred feet up "in the triple canopy", and Lonely Planet author Richard Waters called his visit "the most magical two nights" of his stay in Laos.

Click here to read descriptions of all ten hotels at Lonely Planet.