CLMV Monitor by EIC Quarter 4/2016

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Authors:

Phacharaphot Nuntramas, Ph.D.

Thanapol Srithanpong, Ph.D.

Jiramon Sutheerachart

Kunyarak Naiyaraksaree

• The World Bank and the IMF maintain positive outlook for CLVM countries in 2017. CLMV economic expansion is expected to see stable growth averaging around 7%YOY, preserving their status as one of the fastest growing regions in the world. However, FDI inflows to the region will continue to grow at a moderate level due to weak global investment and other countries leaning toward increased domestic development. Global trade will remain subdued, affecting the performance of CLMV export sectors and risks associated with increased current account deficits. In 2016, the CLMV countries showed progress in many economic development aspects. Ambitious national economic plans, clearer economic goals, infrastructure improvement, deepening regional integration, and trade negotiations were major developments.
  
  

• CLMV will be exposed to more external risks caused by increasing policy uncertainty in major advanced countries. At the “ASEAN Ministerial Meeting Retreat” in the Philippines on February 21, foreign ministers of member countries exchanged views on Trump administration policies toward ASEAN as a priority topic. Other issues were the overall interaction of the ASEAN community and globalization trends. As CLMV countries attempt to increase their openness in regional and global scales, the countries start to prepare for external uncertainties and provide space for fiscal and monetary policies in case of external shocks.
  
  

• Investments in infrastructure development, human capital and high value-added industry are the new growth engines for CLMV countries. Last year, CLMV governments actively improved their infrastructures to lift living standards and support the business environment. All CMLV countries aim to attract additional FDI to more value-added manufacturing such as hi-tech products, vehicle assembly, and electronic parts. Favored FDI and future investments are also required to benefit human capital in terms of job creation and skill spillovers. Transforming from agricultural to more industrialized countries, CLMV countries now begin to focus more on increasing labor productivity rather than depending on only cost competitiveness and labor abundance as in the past.
  
  
  

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Sources: ADB, Bloomberg, CEIC, CIA, IMF, World Bank, Focus Economics, Capital Economics, and Press