The Asian Development Bank (ADB) said Laos’ economy will grow by 3.7 percent, led by services and tourism, despite ongoing economic pressures and a high cost of living.
The ADB report, released Tuesday, showed that the services sector is driving growth, with tourism recovering strongly, with more than 2.3 million tourists visiting Laos in the first half of 2025.
This has boosted the retail, service, and transportation sectors. Industry is expected to expand by 3.6 percent, driven by increased energy and manufacturing. Electricity output rose by 3.2 percent in the first half of the year and is expected to grow by 6.5 percent this year.
Agriculture is projected to grow moderately at 1.3 percent, driven by favorable weather conditions. Other forecasts point to a moderate recovery. The National Institute of Economic and Social Sciences projects Laos’ economy will grow by 3.9% in 2025, rising slightly to 4% in 2026.
These figures are below the parliament’s full-year target of 4.8%, underscoring the ongoing economic challenges despite signs of recovery. The bank has revised its growth and inflation forecasts for Laos due to trade tensions, debt vulnerability, and fiscal constraints. A decline in inflation has provided some relief, but these challenges could slow the recovery.
Food price inflation fell rapidly to 3.1% in August from 24.3% in August 2024, while non-food prices remained high. Overall inflation fell to 5% in August from 11.1% in April. Public finances remain tight by mid-2025.
External debt repayments and principal repayments reached US$533 million. Revenue collection improved, reaching 93% of target in the first half of the year.
Bank of the Lao PDR The policy interest rate was cut from 10% in March to 9% in August, the third rate cut this year. The Lao kip remained stable, appreciating 0.5% against the US dollar while depreciating 6% against the baht.
Foreign exchange reserves increased to US$2.7 billion in August 2025, enough to cover 3.1 months of imports, according to the ADB. “Despite the challenges, we remain optimistic about Laos’ growth potential.
The government’s efforts to manage debt and stabilize the economy are commendable. ADB will continue to support Laos in achieving sustainable development,” said Channy Campbell, ADB Country Director for Laos.
