The Lao economy is projected to grow at8 percent in 2013. The hydropower sector (both completedprojects in operation and projects in the construction ordevelopment phase), construction, food processing, andservices sectors remain the major contributors to thisgrowth. Overall inflation has risen considerably since theend of 2012, due to a notable increase in non-rice foodprices. The fiscal deficit as a ratio to gross domesticproduct (GDP) is expected to widen in FY2012-2013.Therefore, containing aggregate demand through fiscal andcredit growth management is essential to maintainmacroeconomic balances while exchange rate management needsto be measured given the pressures on reserves andcompetitiveness. As the banking sector continues to expandand credit growth remains relatively high, bank supervisioncapacity needs to be strengthened. Lao People'sDemocratic Republic's (PDR's) robust economicperformance and expansionary fiscal policy calls for abolder investment in social sector spending. This paper isdivided into following two parts: part one gives recenteconomic developments; and part two presents sector focus.
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