Laos will likely need bailout to avoid default

Significance

The report says the country “remains in debt distress” and that there is a “high probability of a future distress event”. Problems such as the rapid depreciation of the kip, high inflation and low foreign exchange (forex) reserves are all linked to the country’s debt difficulties.

Impacts

• GDP growth will be relatively slow throughout the remainder of the 2020s as the effects of excessive borrowing catch up with the country.
• The resource sector will remain relatively sheltered from the economic slowdown and continue to attract foreign investment.
• A default would threaten the security of investor assets and prompt broader regional instability.