The Lao economy is estimated to haveexpanded by around 7 percent in 2015, a slight moderationfrom 7.5 percent in 2014. Similar to the last decade, theresource sectors (hydropower and extractives) continued tomake an important contribution to growth. Power generationgot a boost from the commissioning of the first two blocksof the 1,878 MW Hongsa lignite power plant and an additional250-300 MW of installed capacity in the hydro sector.Furthermore, despite lower global commodity prices, miningoutput still increased as metal prices remained above themines’ cost recovery levels. The revised State Budget Law,approved in December 2015, enhances the authority of theNational Assembly in budget oversight and Ministry ofFinance in budget management. In addition, with regards toanti-money laundering and counter-terrorism financing, theGovernment strengthened key regulations (including onforfeiture of assets, border declaration, penalties fornon-compliant entities) recommended by the Financial ActionTask Force (FATF), which helped remove Lao PDR from theFATF’s list of ‘jurisdictions not making sufficientprogress’. The outlook will depend on the progress in theimplementation of the recommendations and agreed measures.GDP is expected to expand at around 7 percent per annum as ahealthy pipeline in the power sector keeps investmentsstrong and increases electricity production and exports byalmost 40 percent. Stabilization of growth rates in Chinaand some acceleration in Vietnam and Thailand shouldincrease demand for Lao PDR exports. On the other hand, somegradual fiscal consolidation is expected, largely throughbroadening the revenue base and efforts to improveefficiency in spending and should help strengthen theoutlook for public debt sustainability and lower the risk ofdebt distress from its current level of moderate, butborderline to high.
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