ADB says a strong rebound in tourism is boosting the service sector, a key driver of 2025 growth. - VT
VIENTIANE: The Asian Development Bank says Laos’ economy will grow by 3.7 per cent in 2025, led by services and tourism, despite ongoing economic pressures and high living costs.
The bank’s Asian Development Outlook report, released on Tuesday, shows the services sector driving growth, with tourism rebounding strongly.
More than 2.3 million visitors arrived in the first half of 2025, boosting the retail, hospitality, and transport sectors.
Industry is expected to expand by 3.6 per cent, supported by gains in energy and manufacturing. Electricity output rose by 3.2 per cent in the first half and is forecast to grow by 6.5 per cent this year. Agriculture will see modest growth of 1.3 per cent, helped by favourable weather conditions.
Other forecasts point to a moderate but fragile recovery. The National Economic and Social Science Institute projects Laos’ economy will grow by 3.9 per cent in 2025, rising slightly to 4 per cent in 2026.
These figures are below the National Assembly’s full-year target of 4.8 per cent, highlighting ongoing economic challenges despite signs of recovery.
The bank revised Laos’ growth and inflation forecasts due to trade tensions, debt vulnerabilities, and fiscal constraints. Inflation has eased, giving some relief, but these challenges could slow recovery.
Food price inflation fell sharply to 3.1 per cent in August from 24.3 per cent in August 2024, while non-food prices remain high. Overall inflation dropped to 5 percent in August from 11.1 per cent in April.
Public finances remain tight. By mid-2025, external debt service and principal repayments reached US$533 million. Revenue collection improved, reaching 93 percent of the target in the first half of the year.
The Bank of the Lao PDR cut its policy rate from 10 percent in March to 9 per cent in August, the third reduction this year. The kip stabilised, appreciating 0.5 per cent against the US dollar while depreciating 6 per cent against the Thai baht.
Foreign reserves rose to US$2.7 billion in August 2025, enough to cover 3.1 months of imports, the ADB reported.
“Despite the challenges, we remain optimistic about Laos’ growth potential. The government’s efforts to manage debt and stabilise the economy are commendable. ADB will continue to support Laos in achieving sustainable development,” said ADB Country Director for Laos, Shanny Campbell. - Vientiane Times/ANN
