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The Lao PDR’s macroeconomic situation remains challenging. Long-standing structural vulnerabilities have been exacerbated by soaring public debt and weak public revenues. The national currency, the kip, depreciated during 2023, while average annual inflation is expected to remain above 20% for a third consecutive year. This situation affects poorer people most seriously and progress in poverty reduction is estimated to have stalled.

Economic growth is forecast to pick up to 4% in 2024, though the outlook remains subject to high economic uncertainty. Tighter monetary and fiscal policies and renewed efforts to enforce foreign exchange restrictions have had little impact in restoring macroeconomic stability. Limited foreign exchange liquidity, and hence a weaker kip, put pressure on external public debt servicing, which constrains fiscal space and exacerbates financial sector vulnerabilities.

Growth over the previous two decades had been predominantly driven by large-scale investments in capital intensive sectors, particularly in mining and hydropower. However, these investments failed to support job creation, and some entailed considerable environmental costs. Moreover, public investment in the power sector has been mostly financed by external debt, often on commercial terms, gradually jeopardizing macroeconomic stability.

The gradual economic slowdown seen since 2012 has become more pronounced. Structural challenges, macroeconomic instability, and a deteriorating external environment have curtailed recovery from the lows of the COVID-19 era, with growth recorded at 2.7% for 2022 and estimated at 3.7% for 2023. The improved performance was largely due to recovery in the services sector. Increased tourism, transport and logistics services, mining, and foreign investment supported growth, while electricity generation was weighed down by weather conditions.

The Lao kip depreciated by 23% against the US dollar between January 2023 and February 2024, a factor feeding high inflation, which stood at 25% in February 2024, with core inflation at 26%. Food and transport price increases were the key drivers.

Economic instability and challenges in social services mean that Laos is in danger of losing gains it has made in poverty eradication, education, nutritional status, and other key human development indicators. Structural reforms are needed to stabilize the economic situation and support a more inclusive growth pattern. A child born in Laos today will only be half as productive as she could be if she enjoyed full health and education. Malnutrition continues to be a critical issue affecting people’s physical and cognitive development, with stunting affecting over 30% of children under five. The maternal mortality rate is also high, at 185 per 100,000 births (2017). According to the government, malnutrition is likely to have increased during the pandemic. There has been a significant fall in school attendance since 2022, possibly because of the pressure from inflation upon household living standards.

Last updated date: April 2024


Proportion of provincial roads in Lao PDR in good or fair condition, compared to 46% in 2010.


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

*Amounts include IBRD and IDA commitments
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Xieng Ngeun Village, Chao Fa Ngum Road, Vientiane
Tel: (+856-21) 266 200
1818 H Street NW, Washington DC, 20433 Tel: +1 202-473-4709