Structural Reforms to Lift Growth: Lao People's Democratic Republic

Against the backdrop of improved macroeconomic stability and Lao People’s Democratic Republic (Lao PDR)’s ambition to achieve upper-middle-income (UMI) status by 2035, this paper examines the impact of structural reforms on Lao PDR’s growth outcomes. The analysis documents the significant structural gaps in Lao PDR relative to upper middle-income countries (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.