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.

Monetary Indicators	2016	2017	2018	2019	2020
Lao Kip (LAK) - Average Annual Exchange Rate For 1 MUR	228.72	242.20	250.17	253.22	229.90

Source: World Bank - Latest available data.

© eexpand, All Rights Reserved.
Latest Update: February 2023