flag Laos Laos: Economic Outline

Economic Indicators

Laos is a rather poor country compared to its neighbors but has experienced very strong growth in recent years (averaging just below 8% in the decade before the pandemic, 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. In 2023, the Lao economy sustained its recovery, with GDP growth estimated at 3.7%, a notable increase from the 2.3% recorded in 2022 (IMF). Economic growth was propelled by enhanced performance in tourism, transport and logistics services, and foreign investment. Nonetheless, the growth rate fell short of initial expectations due to several factors, including the depreciation of the kip, inflationary pressures, labor scarcities, and adverse weather conditions. In the medium term, economic expansion is forecasted to hover around an average of 4.2%, primarily propelled by the services sector and exports. Strengthening global demand, alongside enhanced connectivity and logistics services in Laos, is anticipated to bolster manufacturing and agricultural exports. Additionally, investments in the power sector and special economic zones could further bolster the industry.

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. In the first half of 2023, the government implemented measures to enhance its financial position by managing expenditures and boosting domestic revenues. Despite reductions in value-added tax (VAT) and fuel excise rates, increased economic activity and price escalations helped offset these adjustments. To further bolster revenue streams, the government recently raised excise rates on vehicles, alcohol, and tobacco. Revenue levels, already below regional and income standards, decreased from 22% to 16% of GDP between 2014 and 2019 due to dwindling tax collection and foreign grants. Subsequently, they fell to 13% of GDP in 2020 amidst the COVID-19 pandemic but rebounded to 15% in 2022, partly attributed to inflation (World Bank). Despite achieving a surplus in the first half of 2023, high debt repayments continue to constrain fiscal flexibility, hindering investments in human capital. Consequently, combined public spending on education and health has decreased from 4.9% of GDP in 2013 to an estimated 2.3% in 2023. The mounting public and publicly guaranteed (PPG) debt pose significant challenges to Laos' macroeconomic stability and development prospects. The nation grapples with solvency and liquidity issues due to substantial financing requirements, restricted financing avenues, meager foreign exchange reserves, and considerable depreciation pressures. The IMF estimated the debt-to-GDP ratio at 121.7%, with a reduction expected over the forecast horizon (114.7% by 2025). Inflation, projected at 28.1% in 2023, has escalated consumption expenses, leading to decreased household spending on essential areas such as food, education, and healthcare. This phenomenon has also eroded savings, posing a significant risk of pushing many households into poverty. The IMF expects inflation to decelerate to around 9% this year and 3% in 2025.

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 live 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 3.8% of the total labor force in 2023 (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. The country’s GDP per capita (PPP) was estimated at USD 9,387 in 2022 by the World Bank.

 
Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 15.1215.2015.1916.2217.01
GDP (Constant Prices, Annual % Change) 2.33.74.04.04.1
GDP per Capita (USD) 2,0222,0041,9762,0832,156
General Government Gross Debt (in % of GDP) 134.5122.8115.5104.997.2
Inflation Rate (%) 23.031.221.514.87.0
Current Account (billions USD) -0.01-0.040.260.270.21
Current Account (in % of GDP) -0.1-0.31.71.71.2

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) 58.1 10.8 31.1
Value Added (in % of GDP) 14.6 33.6 41.2
Value Added (Annual % Change) 1.6 3.3 2.5

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
Bank of the Lao PDR (BOL)
 
 

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Latest Update: May 2024

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