2. Development. Lao PDR is a small, predominantly rural country of 5.9 million
people. It has a gross national income per capita of US$630.4 Lao PDR has maintained
relatively stable macroeconomic conditions; its economy continues to grow, but at a
relatively slower pace as the impacts of the global financial turmoil are starting to be
felt—real GDP growth slowed in 2008 to about 7 percent, and projection for 2009 is
between 5 and 7 percent. The country is making progress on its Millennium
Development Goals and on reforms.5 The macroeconomic conditions of Lao PDR
remain relatively stable, reflecting improved monetary and fiscal discipline, with inflation
in single digits for the last several years, public expenditures under control, and the fiscal
situation steadily improving. The poverty headcount fell further from 33 percent in
2002/2003 to 31 percent in 2005/2006. The Government has accelerated reforms across
several areas, including public financial management, trade and private sector
development, governance and anti-corruption, and natural resources management. The
overall competitiveness of the agriculture and manufacturing sectors is relatively weak,
hampering the capacity of the economy to generate employment and ensure broad-based
improvement in living standards. Due to the current global financial crisis, the economy
is facing a number of challenges that feed through a projected decline in foreign direct
investment, commodity prices, potential private sector credit constraints, and declining
exports. The economic downturn in industrialized world gives Lao PDR more urgency to
2. Development. Lao PDR is a small, predominantly rural country of 5.9 million
people. It has a gross national income per capita of US$630.4 Lao PDR has maintained
relatively stable macroeconomic conditions; its economy continues to grow, but at a
relatively slower pace as the impacts of the global financial turmoil are starting to be
felt—real GDP growth slowed in 2008 to about 7 percent, and projection for 2009 is
between 5 and 7 percent. The country is making progress on its Millennium
Development Goals and on reforms.5 The macroeconomic conditions of Lao PDR
remain relatively stable, reflecting improved monetary and fiscal discipline, with inflation
in single digits for the last several years, public expenditures under control, and the fiscal
situation steadily improving. The poverty headcount fell further from 33 percent in
2002/2003 to 31 percent in 2005/2006. The Government has accelerated reforms across
several areas, including public financial management, trade and private sector
development, governance and anti-corruption, and natural resources management. The
overall competitiveness of the agriculture and manufacturing sectors is relatively weak,
hampering the capacity of the economy to generate employment and ensure broad-based
improvement in living standards. Due to the current global financial crisis, the economy
is facing a number of challenges that feed through a projected decline in foreign direct
investment, commodity prices, potential private sector credit constraints, and declining
exports. The economic downturn in industrialized world gives Lao PDR more urgency to
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