flag Laos Laos: Economic Outline

Economic Indicators

For the latest updates on the key economic responses from governments to adress the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Laos is a rather poor country compared to its neighbours but has experienced very strong growth in recent years (averaging just below 8% in the last decade, driven by the exploitation of its mining and hydroelectric resources), placing the country among the fastest-growing economies in the world. Nevertheless, Laos’ economy was severely affected by the global crisis caused by the COVID-19 pandemic, with GDP growth turning negative in 2020 (-0.4%). The economy recovered in 2021, although a new wave of infections in the second half of the year prompted the reintroduction of lockdowns. The IMF estimated growth at 2.1% in 2021, with a brighter outlook for 2022 (4.2%) and 2023 (4.5%). Electricity (representing around one-tenth of GDP and one-fourth of exports) will continue to be a key driver of growth in 2022, with a positive contribution coming from the agricultural sector; whereas the mining and tourism industries should be subdued.

The country’s public finances are somehow fragile. The debt-to-GDP ratio went up to 70.9% in 2021, from 61.6% before the pandemic (IMF): although not particularly high, 80% of it is denominated in foreign currency and externally held (almost half of the public debt is held by China alone). The impact of the COVID-19 pandemic also affected government revenues, which amounted to LAK 24.099 trillion in the first 11 months of 2021, equivalent to 87% of the target figure. Overall, Coface estimated the budget deficit at 5.6% of GDP in 2021, with a better outlook for 2022 (5.3%), as revenue will continue to improve and spending should grow at a slower pace. In 2022, the government plans to collect LAK 31.59 trillion in revenue, representing 16.44% of GDP, with expenditure set at LAK 34.96 trillion (18.05% of GDP). In the same year, the current account deficit is set to narrow slightly as a recovery in external demand should contribute to an improvement in the trade balance. Inflation was relatively high in 2021 (4.9%), but it is expected to gradually ease over the forecast horizon (3.7% this year and 3.1 in 2023, according to the IMF). Mega infrastructure projects are expected to contribute to economic growth in the upcoming years, with projects such as the Luang Prabang dam, the Vientiane-Boten high-speed train line, and the USD 2 billion investments of the Laos Transmission Company Ltd to improve power transmission lines to neighbouring countries. The construction of various highways and rail lines linking up with the Chinese border is also expected to highlight the "land-linked" status of the country. The Lao People's Revolutionary Party is the only allowed party in the country and has been governing since 1975. It has a Marxist–Leninist ideology and controls most of the political and economic aspects of the society, with no real organized opposition.

According to the World Bank, Laos is part of the lower tier of the 'middle-income countries' despite the fact that around 18.33% of the population continues to lives below the poverty line. The level of education is low and the living conditions in rural areas (home to almost 65% of the active population) are precarious. Inequalities with the urban zones are widening, also. Unemployment in the country was estimated at around 1% of the total labour force in 2020 (World Bank, latest data available): although no reliable official figures are available, the ILO estimates that the share of informal employment in the country is among the highest in the world. Figures from the Lao Federation of Trade Unions (LFTU) show that the nation’s unemployment rate was estimated at 9.24% in 2020, with an expected increase to 21.8% in 2021 due to the effects of the pandemic on the economy.

 
Main Indicators 20202021 (e)2022 (e)2023 (e)2024 (e)
GDP (billions USD) 18.5218.5516.2515.0414.85
GDP (Constant Prices, Annual % Change) -0.42.12.23.13.7
GDP per Capita (USD) 22211
General Government Gross Debt (in % of GDP) 82.793.5107.1108.9111.1
Inflation Rate (%) 5.13.815.09.04.0
Current Account (billions USD) -0.84-0.03-0.41-0.89-1.36
Current Account (in % of GDP) -4.5-0.2-2.5-5.9-9.2

Source: IMF – World Economic Outlook Database - October 2021.

Note: (e) Estimated Data


 
Monetary Indicators 20162017201820192020
Lao Kip (LAK) - Average Annual Exchange Rate For 1 GBP 10,975.8010,748.3911,326.0611,236.5011,597.17

Source: World Bank - Latest available data.

 

Main Sectors of Industry

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 61.4 12.9 25.6
Value Added (in % of GDP) 16.2 32.1 40.6
Value Added (Annual % Change) 3.2 3.6 -3.3

Source: World Bank - Latest available data.

 

The Active Population in Figures

201820192020
Labour Force 3,719,7703,793,0163,828,776

Source: International Labour Organization, ILOSTAT database

 
201720182019
Total activity rate 81.33%81.34%81.38%
Men activity rate 82.19%82.21%82.27%
Women activity rate 80.47%80.46%80.49%

Source: International Labour Organization, ILOSTAT database

 

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Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.

Score:
53,9/100
World Rank:
141
Regional Rank:
32

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 
 

Country Risk

See the country risk analysis provided by Coface.

 

Indicator of Political Freedom

Definition:

The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.

Ranking:
Not Free
Political Freedom:
7/7

Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House

 

Indicator of Freedom of the Press

Definition:

The world rankings, published annually, measures violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire incorporating the main criteria (44 in total) to assess the situation of press freedom in a given country. This questionnaire was sent to partner organisations,150 RWB correspondents, journalists, researchers, jurists and human rights activists. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).

World Rank:
172/180

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Sources of General Economic Information

Main Online Newspapers and Portals
BBC Country Profile, Laos
Laotian Times
Ein News - Laos
Laos News
Useful Resources
Ministry of Finance
Ministry of Planning and Investment
Lao National Chamber of Commerce and Industry
Bank of the Lao PDR (BOL)
 
 

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Latest Update: October 2022

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