Outlook for 2011-12

There is little likelihood that the ruling Lao People's Revolutionary Party (LPRP) will face a serious challenge to its authority in the next two years. Continued rapid economic growth and an extensive security apparatus will keep the LPRP's position secure, despite the risks posed by an increasing gap between rural and urban incomes and the unpopular practice of the state leasing land to foreign companies. Real GDP growth will remain strong in 2011-12, at an annual average of 7.8%, buoyed by high global prices for exported commodities. The government will maintain its commitment to regional political and economic integration, but regional ties could be strained by Laos's desire to dam the Mekong river.

The political scene

Two major events in the Lao political calendar took place in March and April: the ninth congress of the LPRP, which was followed by elections for the National Assembly (parliament). Neither event produced any surprises-they confirmed both the dominance of the LPRP over Lao politics and the apparent acceptance of this by the majority of the population.

Economic policy

Inflation is a growing concern for the government, which fears that rising food prices may lead to a failure to meet macroeconomic targets and public unrest across the country. State media reported in early May that food prices in markets were now "out of control", despite a government decree designed to hold the prices of selected products in check. The deputy planning and investment minister, Bounthavy Sisouphanthong, said that the government was re-analysing measures to minimise the impact of inflation.

The domestic economy

According to the Ministry of Planning and Investment, officials approved 188 private domestic and foreign investment projects over the first six months of fiscal year 2010/11 (October-September) with a value of around US$1bn. This means that private investment has already reached 84% of the target for the fiscal year. Mining revenue is increasing as commodity prices continue to rise in global markets. According to the planning and investment ministry, mining earned Laos around K6.9trn (US$830m) in the first six months of 2010/11, representing a year-on-year rise of 58%.

Foreign trade and payments

Laos's trade deficit has expanded to US$211m in the first six months of 2010/11 as imports increased. According to the planning and investment ministry, Laos imported goods worth just over US$1bn, while exports amounted to US$836m.