Laos’ economy is expected to continue expanding this year, even as slower growth and inflation present challenges, according to a global financial institution.
In its latest outlook released on 9 July, the Asian Development Bank (ADB) forecast that Laos’ economic growth will ease this year while inflation surges, driven largely by global pressures including the Middle East conflict and rising energy costs.
The World Bank (WB) echoed the warning, projecting an even slower pace and pointing to an oil price shock that is adding to an already uncertain economic environment.
Despite these warnings, the Lao government struck a more optimistic tone, reporting 4.8 percent growth in 2025 and five percent in the first half of 2026, driven by services, tourism, and industry.
ADB projected growth will ease to four percent in 2026, down from 4.4 percent last year, while WB forecast an even lower 3.8 percent.
Higher fuel costs, weaker demand from the region, and tighter financial conditions are expected to weigh on the economy before activity stabilizes toward the end of the year.
The government is maintaining a target of 5.5 percent for the full year.
Inflation outlook
Alongside slower growth, prices are also expected to climb sharply.
Laos’ inflation rate is expected to rise to 9.8 percent in 2026, well above government expectations, before easing to 6.7 percent in 2027. The organization pointed to a mix of global pressures behind the surge, including energy market uncertainty, tighter financial conditions, turbulence in global stock markets, and rising food prices.
That pressure is already showing up in the government’s own figures, which show inflation reached 7.4 percent in June and averaged 7.93 percent over the first half of the year.
Speaking on the matter, Bounkham Vorachit, Governor of the Bank of the Lao PDR, told the First Extraordinary Session of the 10th National Assembly, held from 6 to 10 July in Vientiane, that the government aims to keep the full-year average below seven percent, after inflation hit 7.7 percent in 2025.
ADB projects a turnaround in 2027, with growth rising to 4.5 percent and inflation cooling to 6.7 percent. In the meantime, Lao authorities have signaled they are keeping a close watch on both fronts, aiming to keep inflation in check while sustaining the momentum seen in sectors like tourism and services.
