Laos: Exiguous Evidence of Economic Reform and Development

Summary

Introduction

There were relatively few surprising or significant developments in Laos during 2003, although various events served to underline the rather unique character and specific challenges that confront one of Southeast Asia's least developed countries. And although the gradual pace at which events tend to occur in Laos did not accelerate in 2003, there were some interesting twists and turns to be observed during the year.

Economic and Business Developments

The Lao economy probably grew by about 5 to 6 per cent in 2003, broadly in line with the average annual growth rate of its gross domestic product (GDP) in the last decade. The local currency held broadly steady in 2003, appreciating marginally against the U.S. dollar and depreciating slightly against the Thai baht, the two foreign currencies most widely used in Laos. Inflation was running at around 11 per cent in 2003, due in large part to higher prices for rice and fuel, as well as continued growth in the money supply. In the first half of 2003, Lao exports were up by around 23 per cent (to US$175 million) and imports burgeoned by 17 per cent (to US$263 million), resulting in a trade deficit of almost US$90 million. Despite the consistent trade and current account deficit, Laos' foreign exchange reserves held broadly steady in 2003, at around US$200 million, or the equivalent of five months' import cover.

Cabinet changes and re-shuffles are quite rare in Laos, but new appointments to the posts of governor of the Bank of the Lao PDR (the central bank) and the minister of finance were made in January 2003. Chansy Phosikham moved from the central bank governorship role to that of finance minister, and was replaced as central bank governor by former trade and tourism minister Phoumi Thaipphavone. Meanwhile, former finance minister Soukan Mahalith became provincial governor of Xiang Khoang, in the northeast of Laos.