2023-12-31-世界银行-_老挝人民民主共和国经济监测_2023年11月_稳定财政政策-主题部分_改善收入调动_51页_1mb

Summary of LAO PDR Economic Monitor - November 2023

Core Content

The Lao PDR Economic Monitor - November 2023 provides an overview of recent economic developments and outlook, alongside recommendations for improving revenue mobilization. The report is prepared by the World Bank Group and focuses on macroeconomic stability, fiscal policy, and structural reforms necessary for sustainable growth.

Main Points

Economic Performance and Outlook

• GDP Growth: Forecasted at 3.7% for 2023, slightly lower than the May 2023 projection due to higher-than-expected kip depreciation and inflation, labor shortages, and unfavorable weather.
• Services Sector: Played a key role in the recovery, supported by tourism, transport, and logistics.
• Merchandise Exports: Growth remained muted due to higher business costs, labor shortages, and lower external demand.
• Inflation: Reached 31.4% in 2023, driven by kip depreciation and high commodity prices. Food inflation was particularly severe at 26%.
• Real Incomes: Declined significantly as living costs rose, with 54% of households reporting stable or declining nominal incomes.
• Poverty Reduction: Progress has been slow, with per capita income growth expected to remain below pre-pandemic and regional levels.

Fiscal and Debt Challenges

• Fiscal Deficit: Remained at -0.2% of GDP in 2023, with primary balance in surplus.
• Debt Levels: Public and publicly guaranteed (PPG) debt reached 112% of GDP at the end of 2022, increasing to 125% when including domestic expenditure arrears and currency swaps.
• Debt Service: Debt service to revenue increased from 35% in 2017 to 43% in 2022, and would have reached 72% without deferrals.
• External Debt: China accounted for about half of the external PPG debt and half of the scheduled repayments for 2024–2027.
• Fiscal Space: Limited due to high debt service obligations, constraining public investment in human capital and basic services.

External Sector

• Current Account: Surplus of -2.9% of GDP in 2023, but could be lower when using trade partner data.
• Foreign Exchange: Official reserves remained low, and only about 40% of export receipts entered the domestic banking system.
• Exchange Rate: The kip weakened by 30–35% against the Thai baht and US dollar in 2023, with a parallel market premium of 15% for USD and 8% for THB.
• Monetary Policy: Tightened with increased policy rates and reserve requirements, but not addressing root causes of depreciation.

Key Recommendations: The Vital Five

To restore macroeconomic stability, the report highlights five key reform areas:

1. Raise Public Revenue: Reduce costly tax exemptions to support social spending and reduce reliance on debt.
2. Improve Public Investment Governance: Enhance efficiency and reduce liabilities from public-private partnerships (PPPs) and state-owned enterprises (SOEs).
3. Restructure Public Debt: Address solvency and liquidity issues through adequate debt treatment and restructuring.
4. Strengthen Financial Sector Stability: Use legal and regulatory tools to enhance bank resilience and credit availability.
5. Enhance Business Environment: Implement effective regulatory reforms to promote investment and exports.

Revenue Mobilization

Current Revenue Performance

• Total Revenue: Declined from 22% to 16% of GDP between 2014–2019, then dropped to 13% in 2020 due to the pandemic.
• Tax Revenue: Accounted for 80% of total revenue in 2022, with non-tax revenues at 16% and grants at 6%.
• Fiscal Consolidation: Achieved through expenditure tightening and interest payment deferrals, but not through improved revenue collection.

Tax Policy Assessment

• Corporate Income Tax (CIT): Collection was 1.1% of GDP in 2022, with a productivity ratio of 1.1%.
• Value-Added Tax (VAT): Collected at 10% in 2022, contributing 1.1% of GDP.
• Excise Tax: Collected at 1.4% of GDP, with a focus on beverages, tobacco, and fuel.
• Tax Exemptions: Deprive the budget of significant revenue, especially for large foreign investors, and exacerbate inflation and exchange rate pressures.

Policy Options

• Tax Reforms: Increase VAT rate to 10%, revise the Investment Promotion Law to reduce tax incentives, and reform excise tax structures.
• Tax Administration: Strengthen compliance and risk management, especially for large taxpayers.
• Public Investment: Improve governance to enhance efficiency and reduce fiscal risks.
• Debt Restructuring: Engage in ongoing negotiations with creditors to ensure sustainable debt management.
• Data Improvement: Enhance the availability, timeliness, and quality of economic data to support evidence-based policymaking.

Risks and Uncertainties

• Domestic Risks: Limited fiscal space, slow structural reforms, and deteriorating bank balance sheets.
• External Risks: Subdued global growth, potential for further depreciation due to external debt obligations, and the impact of geopolitical tensions on commodity prices and inflation.

Conclusion

Restoring macroeconomic stability in the Lao PDR requires a combination of fiscal discipline, structural reforms, and effective debt management. The report emphasizes the need for increased revenue mobilization, improved governance of public and private investment, and stronger financial sector stability. Without addressing these issues, the country risks prolonged economic instability and slower growth.