Lao People's Democratic Republic: Selected Issues

This Selected Issues paper examines the impact of structural reforms on Lao People’s Democratic Republic (PDR) growth outcomes. The government’s overarching goal is for Lao PDR to achieve upper middle-income countries (UMI) status by 2035. Ambitious structural reforms—especially in human development, governance, and the business environment—are essential for Lao PDR to lift medium-term growth and sustainably move toward its goal of reaching UMI status by 2035. The analysis documents the significant structural gaps in Lao PDR relative to UMICs, especially in governance, business regulations, labor market and human development. These gaps suggest there is substantial scope for structural reforms in Lao PDR to catch up with its aspirational peers and boost potential growth. Cross-country evidence suggests that structural reforms significantly boost output over time, with a persistent positive impact which cumulates over time. Thus, implementing ambitious structural reforms—to strengthen governance, improve the business environment, and promote human development—to close structural gaps with UMICs would deliver large growth gains, especially over the medium term, and help Lao PDR achieve its development goal in a sustainable manner.