IMF Staff Country Reports

The 2024 Article IV Consultation discusses that in Lao People’s Democratic Republic growth gathered momentum in 2023 on the back of recovering external demand, but exchange rate depreciation continues and inflation remains persistently high. The coming increase in the government’s financing needs—especially those foreign exchange-denominated—poses severe challenges. Based on current conditions and policy settings, inflation and debt revaluation would likely intensify, implying a significant drag on growth over time. Substantial uncertainties also cloud the outlook, with risks of an intensification of labor emigration and a decline in investment should exchange rate pressures exacerbate, increased pressures on the banking sector from deteriorating asset quality and continuing currency mismatch, and potentially more frequent and more damaging natural disasters. The external economic environment could also turn out to be less favorable, if growth in major trading partners was weaker than expected or commodity prices more volatile.