Laos Country profile

Growth has averaged more than 7% over the past ten years, initially supported by a large run up in global commodity prices. Stronger electricity exports to Thailand, Vietnam and Cambodia and expansion in domestic credit have sustained robust GDP growth. Growth slipped below 7% in 2018 and 2019 because of softer agricultural and mining output. The IMF expects growth to average 6.8% in the next five years, supported by new hydropower projects, and increasing foreign investment in agriculture, manufacturing and services.  The completion of the China-Laos railway in coming years will help increase physical connectivity, lower the cost of transport and logistics, and raise Laos’ economic competitiveness.

Greater ASEAN integration will give Laos exporters access to some 600 million consumers. But the regulatory and procedural changes needed to conform with the ASEAN agreements will require structural adjustments in Laos industry. This could raise business costs in the near term—especially as infant industries in Laos face competition across the ASEAN region. Favourable demographics will support robust growth over the long run; but infrastructure shortfalls and regulatory deficiencies could stymie this economic potential.

Per capita income has risen strongly over much of the last 15 years, consistent with the strong expansion in the economy. Laos recently gained lower-middle-income status by the World Bank but remains classified as a least developed country (LDC) by the UN. When assigning LDC status, the UN considers measures such as quality of life and the structure of the economy in addition to per capita incomes. An IMF study shows that the poverty rate halved to 23% in 2013 from 46% in the early 1990s. But 70% of the population remains engaged in subsistence agriculture, and a big shift into manufacturing and services is needed to lift living standards measurably.