Economic situation Economic stability under threat

    Laos is a member of the burgeoning ASEAN Economic Community. However, behind the image of gathering economic momentum, the reality is a fragile economy based on commodity and energy exports with very little value creation. Growing debt, inflation and an increasing dependence on foreign players has led to a serious financial and economic crisis. The first signs of a slight upturn were seen in 2025, however.

    Factory in Laos

    Laos has been a member of the Association of Southeast Asian Nations (ASEAN) since 1997. It joined the World Trade Organisation (WTO) in 2013, and it has been a member of the Regional Comprehensive Economic Partnership (RCEP) since 2020. The country’s development model is based on energy and commodity exports. Its main income sources are hydropower, mined products, timber and agricultural products. However, national value creation remains low and very few new jobs are being generated. The business environment continues to be unfavourable for the emerging private sector due to a lack of transparency and competition.

    Even before the outbreak of the COVID-19 pandemic, economic growth in Laos had slowed, with rates declining continuously since 2014 (8 per cent growth in 2013, 5.5 per cent in 2019).

    The COVID-19 pandemic exposed how vulnerable the country is to external developments. For a long time, the country’s development trajectory had been comparatively stable, but it faltered with the pandemic: in 2020, economic growth was just 0.5 per cent; a year later, it reached 2.5 per cent. In 2024, the International Monetary Fund reported a growth rate of 4.3 per cent. Inflation reached 41.26 per cent in February 2023, the highest level in 22 years. By 2025, it had sunk to around 20 per cent.

    Growth has slowed down

    The country's development model is based on the export of energy and raw materials (such as hydropower, mining products, timber and agricultural products). Little value addition is taking place within the country, and too few jobs are being created. The business environment for the emerging private sector continues to be unfavourable. There is a lack of transparency and competition.

    Even before the outbreak of the COVID-19 pandemic, economic growth in Laos had slowed, with rates continuously declining since 2014 (8 per cent growth in 2013; 5.5 per cent in 2019).

    The COVID-19 pandemic has exposed the country's high level of vulnerability to external developments. In 2020, the growth rate dropped to 0.5 per cent. In 2021, it was 2.5 per cent. The International Monetary Fund (IMF) expects that growth in 2023 will be 2.2 per cent.

    High levels of external debt

    In a report published in July 2022, the World Bank warned that Laos was on the brink of a debt crisis. The high level of public debt, an inadequate tax base, limited financing options and low foreign currency reserves were posing a threat to the country's economic stability and development outlook.

    Experts have been voicing concern over the fact that Laos is becoming more and more dependent on China. Among other thing, the country has sold the national power grid to a Chinese company. Major infrastructure projects – for example a high-speed train connection from the capital, Vientiane, to southern China – are being financed through Chinese loans. It remains to be seen whether Laos will be able to afford the debt service for these loans.

    As at: 16/02/2026