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Economic overview

Economic overview on Laos

Laos investment information which we have selected

By 2001, the Lao GDP growth rate stood at 5.5%. Since the late 1980s, the government�s economic policy has been to move rapidly from a centralized, planned economy toward an open, liberalized, market-oriented economic system. The foreign exchange markets have been opened and the kip floats freely based on supply and demand in relationship to the exchange rate in the “parallel market.” Formal exchange controls have been lifted.

In 1995, the Lao currency (kip) started to devaluate. The value of kip against US dollar fell from 726 kip per 1 USD in 1994 to 936 kip per 1 USD in 1995. In August 1999, kip reached its lowest point, being traded at a market price of 9,705 kip per 1 USD. After that critical point, the value of kip began to increase and stabilize. From January to October 2000, the exchange rate of kip against USD was bouncing in a narrow margin with the average rate of 7,894.4 kip per 1 USD. By April 2003, the exchange rate was at 10,660 kip per 1 USD.

The average consumer price index in Laos from 1988 to 1997 was 20.447%. After the Asian financial crisis erupted, the value of kip fell sharply. As a result, inflation rate rapidly increased. In 1998, the inflation rate reached a peak of 141,97%. In the third quarter of 1999, however, inflation began to ease. According to the Bank of Lao PDR, the average inflation rate of the year 2000 is 30%. In 2001, consumer price inflation was at 7.8%.

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Real GDP growth % 7.0 5.9 8.1 7.0 6.8 6.9 4.0 7.3 5.7 5.5
Average inflation % 6.00 8.94 6.78 25.66 7.28 26.60 141.97 86.46 30.00 7.8
Yearly average exchange rate (kip/US$) 725 722 722 936 938 1321 3422 7438 7809 n/a

Laos joined ASEAN in 1997 and is a member country of the World Bank, the Asian Development Bank, and the IMF, and is in the process of applying to join the WTO. Tariffs in Laos are below the average rate of the ASEAN countries. Over 60% of recorded imports enter the country under some form of incentive duty reduction scheme. There are no price controls in Laos, although there is government supervision in pricing of petroleum products and electricity and telecommunications rates Though imports still exceed exports, exports have expanded more rapidly.

Balance of Trade and Current Account  

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Exports US$ million fob 132.6 247.9 305.4 346.2 321.0 317.0 341.0 310.9 393 425
Imports US$ million cif 253.0 431.9 564.1 588.8 690.0 648.0 553.0 524.6 591 n/a

Economy

Laos is one of Asia’s poorest nations. Agriculture employs most of the Laotian workforce and accounts for about half of its gross domestic product. Rice is by far the chief crop; sweet potatoes, vegetables, corn, and peanuts are also grown. Commercial crops include coffee, sugarcane, tobacco, cotton, and tea. Illegal opium and cannabis were long produced in the northwest, part of the “Golden Triangle” (which also includes neighboring portions of Thailand and Myanmar), but production there was largely eradicated by 2005. Water buffalo, pigs, cattle, and poultry are raised, and fish from the rivers supplement the diet. Forests cover over half of the country; teak is cut and lac is extracted, but poor transportation and the lack of industry limit production. Copper, tin, and gypsum are mined; other mineral resources include gold and gemstones. Manufacturing is limited; textiles and garments are the most important products.