This Systematic Country Diagnostic (SCD) updates the analytical work of the 2017 SCD in the light of new evidence. In 2017, the World Bank Group (WBG) published the first SCD for the Lao PDR, which comprehensively assessed the binding constraints to economic growth, inclusion, and sustainability. This SCD uses recent evidence to describe developments since 2017, revisit the previous pathways and priorities for achieving the twin goals of ending extreme poverty and boosting shared prosperity, and update knowledge and data gaps. It identifies the most pressing development challenges supported by new data and analytical work and emerging opportunities.Recent evidence suggests that poverty has been reduced but income inequality is increasing. The economy continued to grow strongly between 2017 and 2019 at an average of 6.2 percent per year, albeit at a slower pace than in the preceding three years. Economic growth declined dramatically to 0.5 percent in 2020 owing to the COVID-19 pandemic. The national poverty rate fell from 24.6 percent in 2012 to 18.3 percent in 2018. The standard of living has also improved, with notable gains in access to basic services, education, and health outcomes. However, poverty remains high compared to regional peers and is concentrated among subsistence farmers and minority ethno-linguistic groups. Inequality continues to rise as rapid growth has been jobless. The Gini index increased from 36.0 to 38.8 between 2012 and 2018, and the shared prosperity premium was negative (consumption per capita among the bottom 40 percent grew by 1.9 percent per year compared to 3.3 percent for the total population).