VIENTIANE: The World Bank has forecast eight per cent gross domestic product (GDP) growth for Laos in 2013, driven mainly by mining and hydropower projects, despite the country's recent financial difficulties.

The East Asia and Pacific Update, a bi-annual review of regional economies released by the Bank on Monday, is optimistic the Lao economy will continue to grow at a strong rate, picking growth to fall to 7.7 per cent in 2014 before recovering to 8.1 per cent in 2015.

While the World Bank is confident of continued growth across the region as a whole, it has pushed for countries to institute reform to sustain growth and spread its benefits to the wider population.

“East Asia and the Pacific continues to be the engine driving the global economy, contributing 40 per cent of the world's GDP growth more than any other region,” World Bank East Asia and Pacific Regional Vice President, Axel van Trotsenburg, said in a statement.

“With overall global growth accelerating, now is the time for developing economies to make structural and policy reforms to sustain growth, reduce poverty and improve the lives of the poor and vulnerable.”

Economies of developing East Asia and Pacific countries are projected to grow at 7.1 per cent in 2013, down from 7.5 per cent last year. In China, growth is moderating as the country rebalances to pursue a more sustainable growth path, expected to meet the official indicative target of 7.5 percent in 2013.

Prospects for the region's small economies have markedly improved. In Laos, the Theun Hinboun hydropower expansion and other projects have this year started commercial operations, driving the country's economic growth.

In 2011, Laos recorded eight per cent growth while in 2012 the country reached 8.2 per cent, according to the East Asia and Pacific Update.

Despite economic growth of at least eight per cent, Laos is still facing a number of challenges including rising debt and inflation. In July alone, inflation rose to 7.4 per cent.

Following a recent meeting between the government and provincial governors, government spokesperson Bounpheng Mounphosay told local media the inflation rate in Laos could exceed the rate of economic growth in the near future despite government measures to curb inflation.

Meanwhile the International Monetary Fund (IMF) has warned Laos must tighten its policies to avoid a major economic crisis.

According to independent journal and think-tank Eurasia Review, an IMF mission raised concerns about Laos' rising inflation, banking system, public spending and deteriorating current account deficit during recent annual consultations with the government in Vientiane.

The revenue shortfall has forced the government to rein in expenditure, including halting a monthly living allowance granted to state employees last fiscal year.

Revenue collection over the past 11 months has fallen considerably short of target figures, reaching just 78.38 per cent of the plan for the year.

– By arrangement with the ANN/Vientiane Times –