Identifier
Created
Classification
Origin
09VIENTIANE306
2009-06-25 10:22:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Vientiane
Cable title:  

LAOS: PM TALKS ECONOMY AT OPENING OF NATIONAL

Tags:  ECON EFIN EINV EAID PREL LA 
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VZCZCXRO8706
RR RUEHCHI RUEHCN RUEHDT RUEHGH RUEHHM RUEHVC
DE RUEHVN #0306 1761022
ZNR UUUUU ZZH
R 251022Z JUN 09
FM AMEMBASSY VIENTIANE
TO RUEHC/SECSTATE WASHDC 2664
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUEHOO/CHINA POSTS COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
UNCLAS VIENTIANE 000306 

SENSITIVE
SIPDIS

STATE FOR EAP/MLS
STATE PASS TREASURY FOR SUSAN CHUN
STATE PASS COMMERCE FOR HPPHO

E.O. 12958: N/A
TAGS: ECON EFIN EINV EAID PREL LA
SUBJECT: LAOS: PM TALKS ECONOMY AT OPENING OF NATIONAL
ASSEMBLY

REF: VIENTIANE 264

--------------------------------------------- -----
GOL Sees Lao Economy Brushing Off Great Recession
--------------------------------------------- -----

UNCLAS VIENTIANE 000306

SENSITIVE
SIPDIS

STATE FOR EAP/MLS
STATE PASS TREASURY FOR SUSAN CHUN
STATE PASS COMMERCE FOR HPPHO

E.O. 12958: N/A
TAGS: ECON EFIN EINV EAID PREL LA
SUBJECT: LAOS: PM TALKS ECONOMY AT OPENING OF NATIONAL
ASSEMBLY

REF: VIENTIANE 264

-------------- --------------
GOL Sees Lao Economy Brushing Off Great Recession
-------------- --------------


1. Prime Minister (PM) Bouasone Bouphavanh's address at the
opening of the National Assembly (NA) on June 22, attended by
the Ambassador, focused on Laos' economic situation in light
of the global economic crisis and widespread flooding that
hit Laos in August 2008. Of note was the PM's declaration
that the Lao economy had grown 7.1% during the first 6 months
of FY 2009, bringing average GDP per capita to approximately
$922. Average inflation was listed at 3.17%, while foreign
reserves were said to cover 5.5 months of imports. In light
of global and Lao economic conditions, the PM proposed that
the full FY 2009 target GDP growth rate should be cut from 8%
to 7.5%, without any adjustment to government spending. This
would increase the government's projected budget deficit from
4.56% to 5.25% of GDP.


2. The budget shortfall will be financed via improvements in
revenue collection, including reduced "leakage" (a tacit
reference to inefficiencies and corruption),external loan
and ODA mobilization, and a possible bond issuance. Cutting
spending is not an acceptable option--public "investment" is
needed to stimulate economic growth, and the PM noted the
importance of continuing growth in the next year at 7.5% or
greater in order to meet goals laid out in the 6th 5 year
plan. The PM's short term optimism conflicts with the IMF
(reftel),which is forecasting perhaps 4.5% growth in 2009
and 5% in 2010, with the possibility of macroeconomic
instability should the Government of Laos (GOL) not curtail
its IMF-estimated 8% budget deficit. This threat received a
one-line note from the PM, who mentioned the GOL would "study
and implement necessary measures to deal with those
(financial and monetary stability) issues."

--------------
Comment
--------------


3. The PM's statement showed recognition of some difficult
times ahead. He mentioned that economic growth was based on
unsustainable natural resource exploitation, and admitted
that there is no detailed program for stopping still
widespread slash and burn farming. The elephant in the room,
however, remains the GOL's economic projections, and the
spending plans which flow from them. The PM's speech
appeared to reflect a government that has not embraced the
IMF's recommendations to begin making tough budgetary
choices.





HUSO