Officially the Lao People’s Democratic Republic (Lao PDR), Laos is a developing economy at the heart of Southeast Asia, bordered by Burma, Cambodia, China, Thailand, and Vietnam. Over the last 30 years, Laos has made some progress in implementing reforms and building the institutions necessary for a market economy, culminating in accession to the World Trade Organization (WTO) in February 2013. The government’s commitment to WTO accession and the creation of the ASEAN Economic Community (AEC) in 2015 led to major reforms of economic policies and regulations with the aim to improve the Lao PDR’s business and investment environment. The Lao PDR government is increasingly tying its economic fortune to ASEAN economic integration, export-led development, and growing connectivity as Laos seeks to transform itself from a “land-locked” to “land-linked” country. However, implementation of reforms has begun to stall as economic growth since the pandemic has been slower to recover than in other regional economies, hovering around four percent. Laos is one of the world’s five remaining communist countries. The Lao economic model bears some resemblance to its Chinese and Vietnamese counterparts, in that it has implemented a limited number of market-based economic practices while maintaining a high degree of state control and welcoming foreign direct investment (FDI). Laos is politically stable.
Under the terms of the United States-Laos Bilateral Trade Agreement (BTA), which entered into force on February 4, 2005, the United States granted Normal Trade Relations treatment to products of Laos, and Laos committed to provide U.S. exports to Laos with preferential tariff rates on a range of products and to apply most favored nation (MFN) treatment to the remainder of those goods. Since 2005, bilateral trade increased from $14 million to $842.6 million per year in 2024, driven in recent years by the rapid expansion of solar panel exports to the United States. China, Thailand, and Vietnam are still the dominant trade and investment actors in Laos, with Japan, Singapore, the Republic of Korea, Switzerland, Australia, Indonesia and Cambodia also increasingly active. In 2024, Laos’s bilateral trade was approximately $6.29 billion with China ($3.31 billion in exports, $2.98 billion in imports), $5.72 billion with Thailand ($2.15 billion in exports, $3.58 billion in imports), and $3.44 billion with Vietnam ($2.72 billion in exports, $715 million in imports).
Laos recorded a trade surplus of $1.53 billion in 2024, with imports of $8.4 billion, which increased by 15.6 percent compared to 2024, and exports of $9.9 billion, which increase by 11.9 percent compared to 2024. Laos imported $39.8 million worth of goods from the United States and exported $802.8 million to the United States in 2024. Top U.S. exports to Laos include civilian aircraft (engines, equipment, and parts), pulpwood, passenger cars, rice, plastic materials, gems and diamonds, industrial machinery and equipment, and measuring, testing and controlling instruments. Top U.S. imports from Laos include solar cells and panels, furniture, bedding, mattresses, telecommunications equipment, television and video equipment, footwear, apparel, nonwool textiles or cotton, gems and diamonds, and green coffee.
According to the World Bank, the Lao PDR economy grew by 4.1 percent in 2024, to $16.5 billion, but growth is projected to soften to 3.5 percent in 2025 due to changes in disposable income, decreased demand from trading partners, greater public financing requirements, and increased financing costs.
Laos’s population grew slightly to 7.65 million in 2024. More than two thirds of the workforce is employed in agriculture, mostly in small-scale farming. The population is young, with half under 25 years of age and 60 percent under 35. The country has a small but growing middle class concentrated mostly in the capital and cities such as Savannakhet, Pakse, and Luang Prabang.
Laos is trapped in a severe debt crisis with few paths to fiscal health, threatening economic growth in the short and medium term. Laos’s dual inflation and debt crises stem from unsustainable borrowing for large, often unproductive infrastructure projects, exacerbated by global economic shocks like the pandemic and the Russia-Ukraine war, as well as fiscal mismanagement, weakening government revenues, and currency depreciation. The government continues to take steps to address fiscal deficiencies and is making credible efforts to increase tax revenue and limit spending. Overall, fiscal and budgetary policy formulation and implementation remain weak. According to the International Monetary Fund, public and publicly guaranteed debt reached 108.3 percent of GDP in 2024 and is projected to reach 118.3 percent in 2025. Efforts to address persistent high inflation have been more successful, as continued monetary tightening and efforts to stabilize the exchange rate proved effective. Inflation has declined from a peak of 41.3 percent year-over-year in February 2023 to 5 percent in August 2025.
The Lao Trade Portal, established in 2012, has information for exporters and importers. The Lao Electronic Gazette is a repository for Lao legislation and offers the public the opportunity to comment on proposed legislation, however it is not completely comprehensive. Although most information is in Lao, many laws have been translated into English as well.
Political & Economic Environment: State Department’s website for background on the country’s political environment.