Based on preliminary estimates, the LaoPeople's Democratic Republic (PDR) economy grew by 7.5percent in 2014, compared to an average of 8 percent over2011-13. Looking forward, real gross domestic product (GDP)growth is projected to slow further in 2015 beforeaccelerating in the medium term. Average annual inflation in2014 decelerated to 4.2 percent from 6.4 percent a yearearlier, driven primarily by slower growth in food pricesand a decline in fuel prices. In response to a widenedfiscal deficit in FY2012-13, the government embarked on muchneeded fiscal corrective measures in FY2013-14 andFY2014-15. Foreign exchange reserves coverage remains low ascompared with prudential benchmarks. While the nominalexchange rate remained relatively stable within the band setby the Bank of Laos (BOL), the real exchange rate continuedto appreciate. Indications in 2014 are that bank creditgrowth is slowing down sharply compared to its previousrapid pace over several years. In order to grasp newopportunities and enjoy the benefits of regionalintegration, it is necessary for Lao PDR to take steps tocreate a conducive business environment. In order to achievebroad-based, inclusive growth and poverty reduction in LaoPDR, channeling greater resources toward tackling keyworkforce skills and productivity challenges is ofsignificant importance.
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