VIENTIANE, April 13 (Xinhua) -- Economic growth in Laos is projected to slow to 4 percent in 2026, down from 4.4 percent in 2025, before rebounding to 4.5 percent in 2027, according to the latest Asian Development Outlook annual report, published by the Asian Development Bank (ADB).
In its April 2026 report, the ADB notes that growth will continue to be supported by services, power generation, construction and expanding regional connectivity, despite heightened external uncertainties, according to Lao News Agency on Monday.
The report highlights ongoing macroeconomic stabilization, driven by tighter fiscal and monetary policies, stronger external and fiscal balances, and a rebound in tourism and electricity exports. However, structural constraints, high public debt, and external vulnerabilities remain significant challenges to medium-term growth.
ADB Country Director for Laos, Shanny Campbell, said the country has made notable progress in stabilizing its economy, citing lower inflation, stronger exports, and improved foreign exchange reserves. She stressed that sustaining these gains will require continued fiscal discipline, reforms of state-owned enterprises, particularly in the power sector, and increased investment in productive and climate-resilient sectors.
Inflation, which fell to 7.7 percent in 2025, is expected to rise to 9.8 percent in 2026 due to higher global oil prices, increased transport costs, and pass-through effects on food and other imports. Electricity tariff adjustments and wage increases are also expected to add upward pressure.
Key growth drivers in 2026 will include electricity production, infrastructure development, and services. The industrial sector is forecast to expand by 4.6 percent, supported by continued investment in hydropower, renewable energy, and mining. More than 11 energy projects currently under development are expected to boost construction activity and employment over the medium term.
Despite progress, risks remain tilted to the downside. Global uncertainty is weighing on trade, tourism, and investment, while high public debt -- estimated at around 82 percent of GDP -- limits foreign exchange reserves, and banking sector pressures continue to constrain policy flexibility. Fiscal risks are further exacerbated by liabilities from state-owned enterprises, especially in the power sector, where below-cost tariffs and foreign currency exposure limit resources for social and capital spending.
The report underscores the need for prudent macroeconomic management and accelerated structural reforms to maintain stability and strengthen investor confidence. ■