Regional growth to reach six per cent, says Thailand study
CAMBODIA, Laos, Myanmar andVietnam (CLMV) will see continued firm growth, but risks arise from China’s economic slowdown and country-specific challenges, a Thai report has said.
Economic Intelligence Centre (EIC), a unit of Siam Commercial Bank Public Company Limited, reported that the CLMV economy will maintain its high growth of around six to seven per cent this year.
Amid rising global uncertainties, especially the trade war, international demand to CLMV still supports growth in exports, FDI and tourism.
CLMV exports recorded a five per cent year-on-year growth in the first two months of this year, particularly to the countries with trade privileges and bilateral deals.
Meanwhile, CLMV governments have prioritised their spending to improve the business environment via infrastructure investment and new industry development. Rapid economic growth during the past years will also lead to an expanding middle class which helps support domestic consumption going forward.
Nonetheless, key risks ahead for the CLMV economy are China’s economic slowdown, prolonged current account deficits, and country-specific uncertainties, notably a loss of the EU’s Everything But Arms (EBA) trade privileges in Cambodia and Myanmar, high external vulnerabilities in Laos and Myanmar, and a high credit growth which may lead to new bad loans piling up in Vietnam.
Cambodia’s economy will grow at 6.8 per cent this year. Exports still
grew well, especially to the US and China, under bilateral deals. FDI will continue due to untapped opportunities and relocation plans to avoid the trade war. The tourism sector will remain the key driver this year onward. Risks are associated with the potential loss of the EU’s EBA next year.
Laos’ economy will continue its brisk growth this year. Construction, electricity exports and the tourism sector are the three key economic drivers. Nonetheless, key challenges to Laos are high external vulnerability from high public debt and low foreign reserves, as well as high exposure to China’s economy, especially investment.
Myanmar’s economy will grow 6.4 per cent in 2018-2019, losing its momentum. Exports will be affected by the new round of the trade war and potential loss of EU’s EBA. Together with a prolonged Rohingya crisis, investor confidence has been dampened. The medium- to long-term economic outlook depends on the success of the second economic reforms.
Vietnam’s economy will gradually slow to 6.5 per cent this year and in the next five years. Foreign direct investment and exports are key growth drivers supported by the EU-Vietnam Free Trade Agreement and manufacturing relocation from China to avoid the trade war. Major risks to Vietnam are slower-than-expected global growth, which may dampen exports and high credit expansion.