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Regional growth to exceed 6%: study

Jun 19. 2019
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By The Nation

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CLMV growth to remain firm but risks arise from China’s economic slowdown and country-specific challenges, a report has said.

Economic Intelligence Centre (EIC) reported that the CLMV economy will maintain its high growth of around 6-7 per cent in 2019. Amid rising global uncertainties, especially trade war, international demand to CLMV still supports growth in exports, FDI and tourism. CLMV exports recorded a 5 per cent year on year growth in the first two months of 2019, particularly to the countries with trade privileges and bilateral deals. 

Meanwhile, CLMV governments have prioritised their spending to improve business environment via infrastructure investment and new industry development. Rapid economic growth during the past years also leads to an expanding middle class which helps support domestic consumption going forward. Nonetheless, key risks ahead to CLMV economy are China’s economic slowdown, prolonged current account deficits, and country-specific uncertainties, notably a loss of EU’s trade privileges (EBA) 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 in 2019. 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 in 2020.

Laos’ economy will continue its brisk growth in 2019. Construction, electricity exports, and 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 2018/19, 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. 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 in 2019 and in the next five years. FDI and exports are key growth drivers supported by EVFTA 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.

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