The Lao economy is experiencing growth, driven by sectors such as services, electricity, mining, agriculture, and manufacturing. However, challenges like inflation and labor shortages are impacting stability. A new report by the World Bank outlines these dynamics.
According to the May 2025 Lao Economic Monitor: Weathering Risks, the economy grew by 4.1% in 2024. This growth was supported by a 21% increase in foreign tourist arrivals and enhanced connectivity that facilitated exports. While industry experienced moderate growth despite labor shortages, agriculture remained robust due to export demand for products like rubber and cassava.
Alex Kremer, World Bank Country Manager for the Lao PDR, stated: “The actions of the Bank of the Lao PDR and the government have helped decelerate inflation.” He noted that while inflation remains high, further reforms could enhance economic stability.
Efforts to stabilize inflation include a more stable exchange rate and improved liquidity management through measures like creating a Treasury Single Account. Despite these efforts, public debt levels are unsustainable. The government's increased domestic borrowing might limit credit availability for private companies.
Economic projections suggest growth will slow to 3.5% in 2025. Tourism and transport services are expected to grow at a more modest pace. Although inflation is anticipated to ease, it will likely remain in double digits next year. High debt repayments in 2025 could restrict essential public spending despite expected improvements in revenue collection.
The report also highlights vulnerabilities within the financial sector concerning micro, small, and medium enterprises (MSMEs). These businesses face difficulties accessing credit due to issues such as lack of formal structure and suitable financial products. Recommendations include enhancing support for microfinance institutions and establishing an independent fund dedicated to lending to small businesses.