InfoQuest (December 16, 2019) Cambodia, Laos, Myanmar and Vietnam (CLMV) economic growth will be likely totrade row to 6-7 percent in 2019 and 2020, as exports and tourism in these countries will be affected by the global trade uncertainty and the economic slowdown in major economies, according to the Economic Intelligence Center (EIC) of Siam Commercial Bank (SCB).
CLMV economies will face both internal and external risks. Cambodia and Myanmar are likely to lose the EU's preferential trade treatment--"Everything But Arms (EBA)", which will result in the loss of medium-term export advantages for both countries. Laos still faces the risk of high public debt. While Vietnam could face more protectionist policies from the US side if the US Treasury labels it a currency manipulator.
Cambodia's economic growth is expected to moderate to around 7.0 percent in 2019 and 6.8 percent in 2020, mainly due to the spillover effects of the global trade slowdown. Growth in tourism and foreign direct investment is also expected to slow. While the fiscal situation and the export sector will remain strong, but the risk of losing the EBA scheme from the EU is increasing, which could weigh on exports to the EU, Cambodia's biggest export market. In addition, the rapid growth of microfinance could increase the risk to the financial system in the future.
Laos' economy will recover slowly, with growth expected to be around 6.4 percent in 2019 and 6.5 percent in 2020, mainly caused by natural disasters in 2018, the trade war and China's economic slowdown. At the same time, Laos may face short-term risks, mainly due to the financial burden of limited international reserves and low tax revenues, but future infrastructure and hydropower projects, as well as government tax reform policies, will help stimulate the economy in the medium term.
Myanmar's economic growth will soften to around 6.2 percent in 2019 and 6.3 percent in 2020, mainly affected by domestic risk factors. Myanmar will hold general election in 2020, causing a sharp drop in foreign direct investment. The Rohingya crisis, which has yet to be quelled, puts Myanmar at risk of being stripped of the EBA preferential treatment from the EU, but Myanmar's reform policies and investment from Asian countries will bolster the country's economic recovery.
Vietnam's economy will grow by around 6.8 percent in 2019 and 6.7 percent in 2020. The main drivers are from domestic demand, exports and private consumption. A strong domestic labor market and moderate inflation will help prop up Vietnam's economy amid slowing exports and heightened external risks resulted from protectionist measures America leverages. And the structural reform the Vietnamese government is implementing will drive the next phase of growth in domestic private sector investment and foreign investment.
Due to the trade war, the regional production chain restructuring has a favorable impact on the economy of CLMV countries in the short term, especially on Vietnam. Many Chinese and multinational corporations have decided to relocate their production bases to CLMV countries to avoid being imposed import tariffs by the US. And the large consumer market in CLMV countries is likely to continue to expand, which will help hedge against the negative impact of external risks.
Source: InfoQuest, by Nisarat Wichiensri / Rachada, translated by Xinhua Silk Road
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