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- GDP (PPP):
- $34.4 billion
- 7.4% growth
- 7.9% 5-year compound annual growth
- $4,987 per capita
- Inflation (CPI):
- FDI Inflow:
Laos is one of the Asia–Pacific region’s fastest-growing economies, albeit from a low base. The country has attempted to reform its trade and investment regimes, but non-tariff barriers exacerbated by regulatory inefficiency continue to constrain dynamic flows of goods and services. The pace of economic liberalization and poverty reduction has been slower than in other countries in the region.
Economic Freedom Snapshot
- 2016 Economic Freedom Score: 49.8 (down 1.6 points)
- Economic Freedom Status: Repressed
- Global Ranking: 155th
- Regional Ranking: 35th in the Asia–Pacific Region
- Notable Successes: Monetary Freedom and Trade Freedom
- Concerns: Property Rights, Corruption, and Investment Freedom
- Overall Score Change Since 2012: –0.2
Many aspects of the Laotian economy are in critical need of deep institutional reforms to spur broad-based long-term development. The economy’s overall legal framework is inefficient and lacks transparency. Political interference undermines the rule of law, and systemic corruption hinders the emergence of a more active entrepreneurial class.
The Communist government of Laos, in power since 1975, wrecked the economy in the early years of its rule. Minimal liberalization, begun in 1986, has yielded little progress. To advance its “state-managed market-orientated economy,” the government has taken on increasing levels of external public and publicly guaranteed debt since 2012 to subsidize construction of hydropower and mining mega-projects. Corruption is endemic, laws are applied erratically, and the country is highly dependent on international aid. Basic civil liberties are heavily restricted. Seventy-five percent of the workforce is employed in subsistence farming. In 2013, after 15 years of negotiations, Laos became a member of the World Trade Organization.
High levels of government corruption and graft fuel public discontent and cause leaks in revenue collection and the degradation of public services. Several anti-corruption laws have been passed, but their enforcement remains weak, and no high-profile cases have been brought to trial. The inefficient Laotian judicial system is corrupt and controlled by the ruling party. Protections for property rights are weak.
Both the top personal and corporate income tax rates are 24 percent. Other taxes include a vehicle tax and excise taxes. The overall tax burden for the most recent year equals 15.3 percent of GDP. Government spending has increased to 29.6 percent of total domestic output. The government budget is chronically in deficit, and public debt has increased to over 60 percent of GDP.
Regulatory efficiency has improved. Launching a business no longer requires minimum capital, and licensing requirements, although they still take over 100 days on average, are less costly. The underdeveloped labor market does not provide dynamic employment opportunities for the growing labor supply. Inflation has been rising. The government influences many prices through subsidies and state-owned enterprises and utilities.
Laos has an average tariff rate of 13.2 percent. Some imports require a license. The judicial and regulatory systems may discourage foreign investment. Numerous state-owned enterprises distort the economy. Reforms are ongoing in the underdeveloped financial sector, and the stock market has been in operation since 2011. Government attempts to reform the banking sector have been sluggish.