Lower oil prices, inflation opportunity for economic reform in developing Laos: ADB

Lower global oil prices are an opportunity for developing countries like Laos to pursue timely structural reforms as the region's economic integration continues apace, according to the Asian Development Bank (ADB).

ADB senior country specialist for Laos Mr Shunsuke Bando said Tuesday the low prices leading to subdued inflation provided the chance for an oil-importing country such as Laos to reduce its current account deficit and wind back costly market-distorting fuel subsidies.

Laos' inflation rate is projected at 3.5 percent in 2015, down from 4.2 percent in 2014 and 6.4 percent in 2013.

Mr Bando made the comments at a press conference in Vientiane to mark the publication of the Asian Development Outlook 2015, officially released on Tuesday in Hong Kong.

The report, which looks at national and regional economies across Asia, sees steady growth of 6.3 percent across Asia underpinned by reform for developing countries, recovery in their more advanced peers and reductions in commodity prices.

Speaking at the press conference, ADB Country Director for Laos Sandra Nicoll welcomed Laos' continued economic expansion and recommended policymakers take advantage of the opportunities for macroeconomic reform presented while reducing the nation's fiscal deficit.

"The Lao PDR Economy remains a strong performer in the region with a GDP growth above 7 percent for the ninth consecutive year in 2014, though fiscal tightening and weaker global demand for minerals moderated the pace from 7.9 percent in 2013 to 7.4 percent," Ms Nicoll said.

She said weaker global demand for Laos' mineral exports and fiscal tightening would feed into a lower projected growth rates of 7.0 percent in 2015 and 7.2 percent in 2016.

Meanwhile the nation's expanding power generation sector was expected to be a major positive contributor along with growth in services, she said.

"The outlook for 2015 for the Lao PDR economy remains solid as service sectors continue to contribute strongly."

"However, the main challenges are to reduce expenditure to drive the fiscal deficit down to a more sustainable 3 percent of GDP and to rebuild the foreign reserves which are currently low, leaving the country vulnerable to adverse shocks."

She also highlighted opportunities to encourage further growth as policymakers implement those measures agreed to by the country and its international trading partners.

"Lao acceded to the World Trade Organization in 2013, so by continuing to implement the measures required that will put the country in a good position, especially with the establishment of the ASEAN Economic Community coming soon."

Also speaking at the press conference, ADB Senior Economics Officer for Laos Soulinthone Leuangkhamsing said while minerals and energy where major contributors to growth and revenue, opportunities existed to improve productivity, skills and punctuality of Lao workers to foster growth elsewhere in the economy to compete with those of neighboring countries.

He said more than 70 percent of Laos' working age population remained involved in agriculture on permanent or seasonal bases. Endi