INTRODUCTION

The Covid-19 pandemic has caused significant damage to the socio-economic development of the Lao People's Democratic Republic (Laos). Before the Covid-19 pandemic, Laos had maintained high economic growth for about two decades, while also facing a number of economic challenges, including high external debt, and trade and fiscal deficits. The growth slowdown due to Covid-19 was compounded by increased deficits, largely due to public spending to mitigate the impacts of the pandemic.

Over the period 2020–21, the Covid-19 pandemic resulted in the deployment of lockdown and social distancing measures across the globe. Strict lockdown measures impacted immensely on economies and livelihoods, with economic activities constrained or halted, causing massive contractions in output and income. Stringent measures to limit travel further harmed businesses, leading to the closure of many firms, particularly in services and service-related sectors. The inability of business owners in these sectors to sustain their operations led to serious unemployment as many firms had to lay off their employees.

Like every country, Laos also faced the socio-economic and health impacts of Covid-19. Even though the number of transmissions was kept low compared to many countries, the global nature of the pandemic and the international travel restrictions seriously impacted the Lao economy and its healthcare and education systems. To mitigate the damage caused by the pandemic, the Government of Laos implemented several policies, including fiscal and monetary responses. The economic recovery pathway from the pandemic has become an important debate in Laos.

This chapter investigates the policies and strategies for economic recovery in Laos. First, we provide some context for Laos's economic situation and recent development record, with attention paid to macro-economic factors that affected the country's capacity to respond to and recover from the Covid-19 pandemic. We then provide an overview of the impacts of the Covid-19 virus on Laos and the country's responses. We also discuss Laos's long-term economic challenges. Further, this chapter incorporates an expert survey conducted in 2021 to gather opinions about Covid-19 policy measures and priorities and expectations for economic recovery. Laos's recovery can be observed in retrospect, but the survey findings are useful for shedding light on opinions towards public policy and the recovery outlook while the country was amid the pandemic. Laos's further progress hinges on broader policies that help maintain macroeconomic stability, mitigate devaluation of the domestic currency, moderate inflation and avoid a debt crisis.