Recovery in Services, Investment to Boost Growth in Lao PDR — ADB

VIENTIANE, LAO PEOPLE’S DEMOCRATIC REPUBLIC (4 April 2023) — The Lao People’s Democratic Republic’s (Lao PDR) economy is expected to grow moderately this year and next, thanks to the recovery in services and private sector investments as pandemic restrictions are eased throughout the region, according to a new Asian Development Bank (ADB) report. 

ADB's flagship publication Asian Development Outlook (ADO) April 2023 forecasts gross domestic product (GDP) growth this year and next at 4%. Fresh investment in renewable energy, including the 600-megawatt Monsoon Wind Power Project funded by a financial package of $692.55 million, and border reopening will give a boost to recovery. 

With upgrades to major connectivity infrastructure complete and reopening of borders including with the People’s Republic of China, international tourist arrivals are projected to double to 2.6 million in 2023 from a year earlier. Transit freight is expected to continue its steady expansion, with 1.3 million passengers and 1.9 million tons of cargo transported through the Laos–China railway in 2022. 

However, challenges remain. Inflation pressure will remain high in 2023, projected at 16%, before moderating to 5% in 2024. Prices are expected to climb as businesses pass on costs from imported goods and wage increases to consumers. Adjustments are also planned for electricity tariffs. As such, domestic consumption and the job market are expected to remain weak. 

“Prospects for economic recovery have improved,” said ADB Country Director for the Lao PDR Sonomi Tanaka. “A concern is that inflationary pressure will remain high in 2023. This poses risks to the balance sheets of households, businesses, and the government. Focus on coordination of policy responses is essential to ensure that economic recovery is inclusive and resilient against future shocks.” 

With almost two-thirds of the Lao population currently of working age, the Lao PDR’s young workforce means that more people have potential to be productive and contribute to economic growth. However, high inflation and comparatively low wages mean that many workers are opting to work in neighboring countries, where they can earn more. 

The government needs a comprehensive program that addresses macroeconomic vulnerabilities and challenges in the labor market. It is important for the government to support local industrial development through regulatory reform that improves the business environment.

ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region.

This was first uploaded on the ADB website.