In Short : The Asian Development Bank (ADB) forecasts Lao PDR’s economy to grow 3.7% in 2025, supported by agriculture, tourism, and hydropower exports. However, challenges like high external debt, currency depreciation, and inflation remain concerns. Strengthening macroeconomic stability, boosting investment, and diversifying exports are seen as crucial for sustaining growth and improving resilience against global uncertainties.
In Detail : VIENTIANE, LAO PEOPLE’S DEMOCRATIC REPUBLIC — Services continue to be the main driver of growth in the Lao People’s Democratic Republic (Lao PDR) for 2025, with the sector forecast to expand by 4.5%, according to a new report by the Asian Development Bank (ADB) released today. The tourism sector rebounded strongly with 2.3 million arrivals in the first half of the year, reflecting better regional connectivity and targeted marketing. Tourism boosted retail, hospitality, and transportation.
Lao PDR’s industry sector is forecast to grow by 3.6% in 2025, supported by gains in energy and manufacturing, ADB’s flagship Asian Development Outlook (ADO) September 2025 report states. Electricity output increased by 3.2% in the first half of 2025 and is expected to expand by 6.5% for the year. Agriculture is projected to expand modestly by 1.3% in 2025, supported by favorable weather conditions.
ADB has revised its growth and inflation forecasts for 2025 due to ongoing economic challenges and easing inflationary pressures. While the easing of inflation provides some relief, trade tensions and fiscal constraints could slow recovery more than projected. The growth forecast for the Lao PDR has been revised down to 3.7% for 2025 and 3.8% for 2026, primarily due to debt vulnerabilities, weak demand, and tariffs.
“Despite the challenges, we remain optimistic about the Lao PDR’s potential for growth. The government’s efforts to manage debt and stabilize the economy are commendable. ADB will continue to support Lao PDR in achieving sustainable development,” said ADB Country Director for Lao PDR Shanny Campbell.
Public finances remain tight, with external debt service and principal repayments reaching $533 million by mid-2025. Revenue collections improved, reaching 93% of the first half-year target. Inflationary pressures eased significantly in 2025, with inflation falling to 5.0% in August from 11.1% in April. Food inflation decreased sharply to 3.1% from 24.3% in August 2024, while non-food inflation remains high.
The Bank of the Lao PDR cut its policy rate from 10% in March to 9.0% in August, its third decline this year. The exchange rate stabilized, with the kip appreciating 0.5% against the US dollar while depreciating 6.0% against the Thai baht. Foreign reserves rose to $2.7 billion in August 2025 from $2.1 billion in December 2024, providing 3.1 months of import cover.
ADB is a leading multilateral development bank supporting inclusive, resilient, and sustainable growth across Asia and the Pacific. Working with its members and partners to solve complex challenges together, ADB harnesses innovative financial tools and strategic partnerships to transform lives, build quality infrastructure, and safeguard our planet. Founded in 1966, ADB is owned by 69 members—50 from the region.
