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The Lao economy depends on investment and trade with its neighbours, Thailand, Vietnam, and, especially in the north, China. Pakxe has also experienced growth based on cross-border trade with Thailand and Vietnam. In 2009, despite the fact that the government is still officially communist, the Obama administration in the US declared Laos was no longer a Marxist–Leninist state and lifted bans on Laotian companies receiving financing from the US Export-Import Bank

In 2016, China was the biggest foreign investor in Laos's economy, having invested in US$5.395 billion since 1989, according to Laos Ministry of Planning and Investment's 1989–2014 report. Thailand (invested US$4.489 billion) and Vietnam (invested US$3.108 billion) are the second and third largest investors respectively. The economy receives development aid from the International Monetary Fund, Asian Development Bank, and other international sources; and also foreign direct investment for development of the society, industry, hydropower and mining (most notably of copper and gold)

Subsistence agriculture still accounts for half of the GDP and provides 80% of employment. Only 4% of the country is arable land and a mere 0.3% used as permanent crop land, the lowest percentage in the Greater Mekong Subregion. The irrigated areas under cultivation account for only 28% of the total area under cultivation which, in turn, represents only 12% of all of the agricultural land in 2012. Rice dominates agriculture, with about 80% of the arable land area used for growing rice. Approximately 77% of Lao farm households are self-sufficient in rice. Laos may have the greatest number of rice varieties in the Greater Mekong Subregion. The Lao government has been working with the International Rice Research Institute of the Philippines to collect seed samples of each of the thousands of rice varieties found in Laos

Laos is rich in mineral resources and imports petroleum and gas. Metallurgy is an important industry, and the government hopes to attract foreign investment to develop the substantial deposits of coal, gold, bauxite, tin, copper, and other valuable metals. The mining industry of Laos has received prominent attention with foreign direct investments. This sector has made significant contributions to the economic condition of Laos. More than 540 mineral deposits of gold, copper, zinc, lead and other minerals have been identified, explored and mined. In addition, the country's plentiful water resources and mountainous terrain enable it to produce and export large quantities of hydroelectric energy. Of the potential capacity of approximately 18,000 megawatts, around 8,000 megawatts have been committed for export to Thailand and Vietnam. As of 2021, despite cheap hydro power available in the country, Laos continues to also rely on fossil fuels, coal in particular, in the domestic electricity production.

In 2018, the country ranked 139th on the Human Development Index (HDI), indicating medium development. According to the Global Hunger Index (2018), Laos ranks as the 36th hungriest nation in the world out of the list of the 52 nations with the worst hunger situation(s). In 2019, the UN Special Rapporteur on extreme poverty and human rights conducted an official visit to Laos and found that the country's top-down approach to economic growth and poverty alleviation "is all too often counterproductive, leading to impoverishment and jeopardising the rights of the poor and marginalised."

The country's most widely recognised product may well be Beerlao, which in 2017 was exported to more than 20 countries worldwide. It is produced by the Lao Brewery Company.