The Lao economy performed well in 2009 despite the global financial crisis with a growth rate of 6.4 percent, the second highest in East Asia after China, according to a World Bank report.

The report showed that a main reason for this impressive growth is that the Lao economy is relatively insulated from the global financial system and its exposure to global trade is still limited, thereby mitigating the direct impact of external shocks.

A sustained demand for Lao exports, including copper and gold bought by China, garment products by Europe and electricity by Thailand, combined with its strong tourism industry also helped cushion the Lao economy compared to other nations.

Another cause was an increase in expenditures on domestic infrastructure in order to facilitate the 25th Sea Games in Vientiane in December 2009.

The report also said that while Laos ’ economic growth remained strong during the recession, this growth is primarily driven by the metals processing industry and hydropower plants, which are not sustainable in the long-term due to the unavoidable depletion of natural resources.
Therefore, the WB suggested that the Lao government shift the base of economic growth toward the agricultural processing industries and services, including tourism.

The Lao government should focus on developing human resources, improving its investment mechanisms and increasing efforts to encourage private investment, create jobs and increase incomes for local people, the report said./.