Laos is expected to post real GDP growth of around 2.5% in 2025, but the fragile recovery remains overshadowed by persistent inflation of nearly 9.4%, underlining structural weaknesses in the economy.
Tourism and infrastructure support growth
A rebound in tourism, supported by over five million visitors in 2024, and the continued impact of the Laos–China railway are helping drive economic activity. Service industries tied to hospitality and transport have benefited, while infrastructure projects remain a critical pillar of expansion.
Inflation undermines household spending
At the same time, stubborn inflation is eroding consumer purchasing power and limiting domestic demand. Rising food and energy costs have intensified pressure on households, contributing to a widening gap between urban and rural communities. Analysts warn that without targeted fiscal and monetary policy, inflation could undermine the fragile growth trajectory.
Digital banking steps in
With traditional banking penetration still limited, digital platforms and mobile payments are stepping in to fill critical gaps. Fintechs enabling cross-border payments, particularly for Chinese visitors, have seen rapid growth, while local digital lenders are providing credit solutions to small businesses struggling under high input costs. These developments highlight the role of technology in stabilising economic participation.
Outlook
Laos faces the dual challenge of sustaining modest growth while combating inflation. Success will depend on diversifying beyond tourism and leveraging digital financial tools to expand access to credit and improve monetary inclusion. Without such steps, the economy risks remaining trapped in a low-growth, high-inflation cycle.
REFH – Newshub, 26 August 2025
Recent Comments