The International Monetary Fund (IMF) has projected that Laos’ economy will expand by 4.5 percent in 2026, supported by stronger exports, rising tourism, foreign direct investment, and an accommodative fiscal stance.

According to the IMF, favorable external conditions and strong policy actions have helped stabilize the economy, support the exchange rate, and quickly bring down inflation. 

The organization added that headline inflation is likely to rise gradually in 2026 because of planned fiscal support and scheduled electricity price increases.

Risks Remain Despite Robust Growth Outlook

While maintaining an overall positive assessment of Laos’ economic prospects, the IMF highlighted concerns regarding the country’s external balance and potential vulnerabilities. It expects the current account surplus to narrow from its 2025 peak, though the overall external position should remain broadly stable, supported by strong foreign investment.

Despite the encouraging indicators, the IMF warned that several risks persist.

Global and domestic pressures, including geopolitical tensions, volatility in commodity and financial markets, premature policy changes, and natural disasters, could weigh on the economy.

The organization also pointed out that some banks remain vulnerable due to weak profitability and liquidity. Even so, it said greater regional integration, if effectively managed, could boost growth and help maintain external stability over the medium term.

Structural Reforms Key to Long-Term Stability

Looking ahead, the IMF emphasized that Laos must address deeper structural challenges to boost long-term growth. The fund highlighted the importance of better governance, stronger human development, and a more supportive business environment.

Recommended measures include enhancing transparency, improving coordination among government agencies, ensuring reliable data collection, and expanding public access to information. The IMF also urged the government to advance regulatory reforms, reinforce anti-corruption efforts, and restructure state-owned enterprises.

It added that boosting the efficiency of these enterprises, through better oversight, updated disclosure requirements, and modernized regulations, would help reduce fiscal risks and raise productivity.

The IMF concluded that while Laos is on track for steady economic growth, sustained reforms and efforts to build resilience will be critical to support stability and long-term development.