CLMV Monitor by EIC Q3/2019
Growth to moderate in coming years from external headwinds and rising domestic challenges
CLMV economic growth will likely moderate to 6-7% in 2019 and 2020 as external risks have become more pronounced. The global economic slowdown caused by trade conflicts has had spillover effects on CLMV economies. CLMV exports in the first five months of 2019 contracted by 8%YOY, dragged down by falling shipments to major Asian trade partners. However, CLMV countries continue to attract large FDI inflows. The current trade war is likely to accelerate production relocation trends to the CLMV in the coming years, mainly to Vietnam. In addition, the tourism and service sectors are expected to play an increasing role in contributing to economic growth ahead as a buffer from weak exports. For domestic markets, urbanization and a growing middle-income class have increased people’s purchasing power and demand for more varied goods and services. Nonetheless, the key risks to CLMV economies are a sharper-than-expected global economic slowdown, especially in China, and country-specific challenges.
