The Lao People’s Democratic Republic’s (Lao PDR) economy is expected to expand moderately over 2024 and 2025, due to external demand linked with tourism and trade, according to a new Asian Development Outlook (ADO), April 2024 report.
ADB forecasts gross domestic product (GDP) growth of 4% in 2024 and 2025. External demand will support growth in services, with international tourist arrivals projected to increase to 4.2 million in 2024 thanks to improved infrastructure connectivity. Foreign investment in renewable energy will help drive moderate industrial growth, such as the development of the Monsoon Wind Power Project which is expected to be completed in 2025. However, macroeconomic pressures will continue to weigh on growth prospects.
The Lao PDR’s economic and financial challenges—notably high public debt, steep currency depreciation, and elevated inflation—are contributing to persistent food and nutrition challenges. High food inflation is of particular concern, averaging 39.5% in 2023. One in seven people in the country experienced food insecurity in 2023, with rural dwellers twice as likely as urban dwellers to face shortages. Food insecurity and poor nutrition come at a high cost, including stunting from malnutrition which can lower a child’s productivity over their lifetime.
The government has acted to ease household stress by working with development partners to expand social assistance, improve health services, and invest in clean water and sanitation. Looking ahead, it will be crucial to develop long-term, sustainable financing mechanisms to tackle the multidimensional nature of food security amid macroeconomic instability. This involves reforms to overcome economic and financial challenges and further improvements to social assistance that are nutrition-sensitive and climate-resilient.
Development agencies such as ADB, IMF, UNDP have clearly outlined the role of private sector in shaping Lao PDR’s investment outlook that can be attractive for investors and boost the economy to address some of the development challenges described above. For example, ADB’s country strategy to improve private sector ecosystem in Lao PDR includes improving business environment and using regional platform funds to grow enterprises, create an enabling environment for Public Private Partnerships (PPPs) and support climate resilient investments. Similarly, as part of UNDP’s strategy for Lao PDR between 2022 and 2026, there is a significant focus on addressing governance related bottlenecks that can help improve direct private sector investments into the SDGs.
Sources:
International Monetary Fund, Lao People's Democratic Republic, Article IV consultation, 2023
ADB Country Private Sector Development Plan, Lao PDR
The World Bank in Lao PDR, Overview
- UNDP Country programme document for the Lao People’s Democratic Republic (2022-2026)