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Monday, October 13, 2025
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ADB Lowers Laos’ 2025 Growth Forecast to 3.7 Percent Amid Economic Challenges

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The Asian Development Bank (ADB) has lowered Laos’ 2025 GDP growth forecast from 3.9 percent to 3.7 percent, citing debt vulnerabilities, weak demand, and trade tensions. 

The ADB’s September report notes that despite resilience in key sectors, ongoing fiscal and external challenges continue to weigh on the economy.

Despite these headwinds, services remain the primary growth engine, expected to expand 4.5 percent. Tourism has rebounded strongly, with over 3 million visitors in the first eight months of 2025, bolstering retail, hospitality, and transportation sectors. 

Industry is projected to grow 3.6 percent, supported by gains in energy and manufacturing, while agriculture is forecast to expand modestly by 1.3 percent, aided by favorable weather conditions.

Meanwhile, inflationary pressures have eased considerably, with overall inflation falling to 4.5 percent in August from 11.1 percent in April. Food inflation dropped sharply to 3.1 percent from 24.3 percent year-on-year. 

The Asian Development Bank (ADB) lowers Laos’ 2025 growth forecast from 3.9 percent (April) to 3.7 percent (September) amid debt vulnerabilities and trade challenges. (Photo credit: Asia Development Bank)

The Bank of Laos reduced its policy rate to 9 percent in August, while foreign reserves rose to USD 2.7 billion, providing 3.1 months of import cover.

ADB Country Director for Laos, Shanny Campbell, said that despite the challenges, Laos has strong growth potential. He also praised the government’s efforts to stabilize the economy and its debt management.

However, ADB cautioned that fiscal constraints and trade tensions, including a 40 percent US reciprocal tariff on Laos effective 1 August, among the highest in the region, could slow recovery. 

The growth forecast for 2026 has also been revised slightly downward to 3.8 percent from April’s projection of 4 percent.

At the regional level, ADB now projects Developing Asia’s growth at 4.8 percent in 2025 (down from 4.9 percent in April) and 4.5 percent in 2026 (down from 4.7 percent), as higher US tariffs weigh on exports. Inflation is expected to ease to 1.7 percent in 2025 before rising slightly to 2.1 percent in 2026, supported by fiscal and monetary policy measures.

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