The report forecasts a strong growth of 7.4 per cent in 2010, an improvement over the forecast of 7 per cent in its Asian Development outlook 2010 published in April this year.

The industry sector, particularly minerals and hydropower generation, has continued to expand, and export orders for garments rose by about 15 per cent year on year in the second quarter of 2010.

Economic growth is further supported by modest increases in tourism arrivals. However, drought delayed planting of rice, which could dent growth in agriculture this year.

The Gross Domestic Product growth forecast for 2011 is maintained at 7.5 per cent.

Laos economic is performing very well in the Southeast Asian regional context. The measures taken in 2008 and 2009, including the stimulus package, appear to have paid off, and the economy is well-positioned for further growth, said ADB Lao PDR Resident Mission Country Director Chong Chi Nai.

On the down side, inflation has been higher than expected, accelerating to 6.8 per cent year on year in July. The main factors were high food and fuel prices, with the drought hurting food production and prices. Inflation is now projected to average 6 per cent in 2010, quickening to 6.5 per cent in 2011. The start this year of significant electricity exports from the large Nam Theun 2 hydropower project and rising global prices for exports of copper, gold, and silver have improved the current account position. Forecasts for the current account deficit are narrowed to 9 per cent of GDP in 2010 and 8 per cent 2011.

Exports of electricity and minerals are set to increase next year with the commissioning of hydropower projects and expansion of two mines scheduled for completion by end 2010.

The overall balance of payments will remain positive over the forecast period, supported by inflows of foreign direct investment.

Asian Development Outlook and Asian Development Outlook Update are ADBs flagship economic reports analyzing the economic conditions and prospects in Asia and the Pacific, and are issued in April and September, respectively.

Developing Asias robust recovery from the global crisis is gaining further momentum, said ADB.

The report forecasts healthy growth of 8.2 per cent in 2010, well above 5.4 per cent recorded in 2009 and also above ADB earlier forecast of 7.5 per cent in ADO 2010 released in April. Strong export recovery, robust private demand, and the sustained effects of stimulus policies allowed the region to experience solid growth in the first half of 2010. This improved performance is broad-based and is projected to carry on for the rest of the year.