Last Updated: September 2016

Lao PDR, a lower-middle income economy with a GNI per capita of $1,730 in 2015, is one of the fastest growing economies in the East Asia and Pacific region. GDP growth averaged 7 percent over the last decade, with increasing use of the country’s natural resources – mostly water, minerals and forests – contributing one third to growth. Construction and services also expanded, with growing regional integration boosting tourism and attracting foreign investment. Growth contributed to lowering the number of poor people to an estimated 23.2 percent of the population in 2012/13 from 33.5 percent a decade ago. However, poverty has been declining slowly compared with some regional peers. The macroeconomic environment remains challenging, reflecting both domestic, and increasingly external risks, and needs careful management.

The economic outlook remains broadly favorable supported by the power sector and growing ASEAN integration, and the fiscal and external deficits are expected to gradually narrow. GDP growth is projected at 7 percent in 2016. The 1,878 MW Hongsa lignite power plant will largely come on stream in 2016 and together with the output expected from other new power projects is expected to increase power generation by more than 30 percent compared to 2015.  Construction is expected to remain resilient supported by the pipeline power projects and real estate development. The current account deficit is expected to narrow slightly as power exports increase and recent trends in exports of parts and components continue.

As a member of the Association of Southeast Asian Nations (ASEAN), Lao PDR is increasing its integration into the regional and global economy, and is the chair of ASEAN in 2016. The launch of the ASEAN Economic Community in of 2016 is expected to further liberalize the movement of goods and services, capital and high-skilled labor in the regional block. Lao PDR has been a member of the World Trade Organization since February 2013.

Lao PDR has made good progress on a number of Millennium Development Goals (MDGs), including halving poverty, reducing hunger, and improving education and health outcomes. However, certain MDGs remain off track, most crucially on nutrition, with an estimated 44 percent of under-five children being stunted and 27 percent severely underweight.  Lao PDR still has a high maternal mortality rate and limited skilled birth attendance and could also do more to place gender equality at the center of its national development plans. The Sustainable Development Goals (SDGs) post-2015, built on the MDGs, will provide a framework for the Government to monitor and evaluate the progress in its development plan implementation and commitments.

As of September 2016, the World Bank has an ongoing portfolio of US$427 million supporting 19 projects, including $76 million provided through Development Partner funding. The largest sectors are environment and natural resources (28%), social development (18%) and energy and mining (13%).

Last Updated: September 2016

The World Bank Group (WBG) continues to work with the Government of Lao PDR as it strives to graduate from Least Developed Country status. The WBG’s operations in the country are guided by the Country Partnership Strategy (CPS) for 2012-2016, designed to build stronger institutions for sustainable and inclusive development and support the Government’s development strategy laid out in the 7th National Socio-Economic Development Plan for 2011-2015.

Earlier in 2016, the WBG carried out public engagement meetings with a wide range of stakeholders on Lao PDR’s Systematic Country Diagnostics (SCD). The engagement included eight face-to-face meetings in four locations with around 350 stakeholders, including government officials in the capital and provincial authorities, private sector, civil society representatives and development partners. An online survey was also undertaken. Upon completion of the SCD, the World Bank Group plans to work with Lao PDR to develop its future WBG Country Partnership Framework (CPF). 

The World Bank Group’s Country Partnership Framework 2017-2021 is currently being developed and will be aligned with the Government’s 8th National Socio-Economic Development Plan 2016-2020.

Possible focus areas may include:

Sharing Growth: Improve business and trade environment, strengthen development planning, budgeting and accountability, and improve access to basic infrastructure services and connectivity.

Investing in Human Development: Enhance social welfare by improving access to high quality education, health care and reducing incidence of malnutrition.

Protecting the Environment: Support environmental protection, sustainable natural resources management and preparedness for climate change adaptation, natural disasters and risk mitigation.

Cross-cutting theme: Enhancing governance and creating a rules-based environment.

Last Updated: September 2016

The Poverty Reduction Fund (PRF) is the largest multi-sector community-driven development project in the country.  The PRF II project, with total funding of about $65 million including $37.6 million from IDA and $10 million from the Government of Lao PDR (GOL), has benefited more than 650,000 rural poor in about 1,400 villages. In PRF II target villages, access to protected water increased by 58.2 percentage point, and travel time to the nearest village was reduced on average by 114 minutes in the dry season and 73.1 minutes in the wet season. More than 90% of subprojects implemented 4 – 6 years ago are still in good or fair condition, and PRF investments are overall equally or more cost effective compared to similar investments financed under other sources. The third phase, the PRF III, was approved on 24th May 2016, started implementation in mid-2016 which will continue to improve access to vital infrastructure including schools, health clinics, roads and drinking water systems in about 250 poor kumbans in 10 provinces, with funding from IDA of US$30 million and US$6 million from the GOL.

The Health Governance and Nutrition Development Project, under implementation since October 2015, aims to improve the coverage of reproductive health, maternal health, child health and nutrition services for women and children in Lao PDR.  Over five years, the project is expected to benefit approximately one million women and children across 14 provinces. The project uses an innovative approach of linking disbursement of funds to improve performance in the delivery of basic health services. In addition, children in high priority nutrition districts will benefit from improved counselling and follow up of their growth as well as changed behaviors and practices of their caregivers through a social and behavior change communication program. The project further includes support for strengthening information systems and technical assistance in improving the performance of health financing and health protection programs, with a view to progress toward Universal Health Coverage in Lao PDR.

The project builds on the earlier World Bank supported Health Services Improvement Project (HSIP) which closed in December 2015. HSIP assisted the Government to increase utilization and quality of health services for poor women and children, particularly in the rural areas of five provinces—Attapeu, Champasack, Salavan, Savanakhet, and Sekong. Its preliminary results showed that 780,000 poor people have been provided with access to a basic package of health, nutrition, or reproductive health service. Nearly 900,000 poor patients benefited through health equity fund, 424 health facilities were constructed and renovated, and more than 3,350 health personnel received training.

The NT2 Hydropower Social and Environmental Project is helping to finance health care and education in Lao PDR through the sale of electricity to Thailand and to the Lao grid. Government revenues generated by the NT2 project are used to finance priority poverty reduction, environmental management, and natural resource conservation projects in Lao PDR. Since the start of commercial operations in 2010, NT2 has consistently met energy production targets, and as of fiscal year 2015-2016 the Government had received about $165.7 million in revenues (based on audited financial statements of the Government of Lao PDR and NT2 account from fiscal year 2009/2010 to fiscal year 2014/2015 and estimated revenue for fiscal year 2015/2016). By 2035, the project is expected to have generated around $2 billion in government revenues for these activities. NT2 is jointly implemented by the Nam Theun 2 Power Company and the Government of Lao PDR and is supported by financing from 27 parties, including the World Bank Group.

The Customs and Trade Facilitation Project is helping to make border clearances faster and more efficient. A computerized customs clearance system, which now operates in 21 official customs checkpoints, takes payments electronically and provides this information in real-time to the Government’s financial management system. The automated customs system—ASYCUDA World—covers 99% of formal trade at these checkpoints and has improved customs valuation, introductory risk management and trade statistics reporting. Customs clearance procedures have also been streamlined and modernized as part of the project.

The Second Trade Development Facility Project (TDF-2) assists the Lao PDR to implement trade and competitiveness priorities after its formal World Trade Organization accession in February 2013. It builds on the achievements of TDF-1, which established a permanent National Trade Facilitation Secretariat and launched an electronic Trade Portal making all trade-related information publicly available. Under TDF-2, all non-tariff measures affecting trade have been catalogued and published online, and assessments of regulations affecting trade in services and investment, as well as sector specific regulations for telecommunications, insurance and professional services, have been completed. A matching grant “Business Assistance Facility” is supporting individual firms in building their skills and experience, so as to become more competitive internationally.


Lao PDR: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments