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The Asian Development Bank (ADB) has revised its economic growth projections for Laos downward, pointing to persistent debt vulnerabilities, weak external demand, and ongoing trade tensions as key factors tempering the nation's recovery.
In its latest outlook report released Tuesday, the Manila-based bank now forecasts Laos' economy to expand by 3.7 percent in 2025, a slight reduction from its April projection of 3.9 percent. The growth forecast for 2026 has also been trimmed to 3.8 percent from 4.0 percent.
While acknowledging that easing inflation has provided some relief, the ADB warned that fiscal constraints and global economic pressures are expected to slow the pace of recovery more than previously anticipated.
Despite the downward revision, the report highlights several robust areas within the Lao economy. The services sector is poised to remain the primary engine of growth in 2025, with an expected expansion of 4.5 percent. This strength is largely fueled by a powerful rebound in tourism, which saw 2.3 million international arrivals in the first half of the year alone. Improved regional connectivity and targeted marketing campaigns have been credited for this surge, which has subsequently boosted retail, hospitality, and transportation industries.
On the production front, the industrial sector is forecast to grow by 3.6 percent, buoyed by gains in energy and manufacturing. A notable bright spot is electricity production, which increased by 3.2 percent in the first six months of 2025 and is projected to accelerate to a 6.5 percent growth rate by year-end. The agriculture sector, meanwhile, is expected to see a modest growth of 1.3 percent, supported by favorable weather conditions.
In the face of economic headwinds, ADB officials expressed continued confidence in Laos' long-term prospects.
"Despite the challenges, we remain optimistic about Laos' growth potential," stated ADB Country Director for Laos, Shanny Campbell. "The Lao government's efforts to manage debt and stabilize the economy are commendable, and ADB will continue to support Laos in achieving sustainable development."
The updated assessment underscores a cautious optimism for Laos, where strong sectoral performances are working to offset broader macroeconomic challenges.
KPL
